EU Handbook CHP Markets by mikeholy

VIEWS: 18 PAGES: 144

									  A spring-board for your exports

                                            EU Handbook
                                            CHP Markets

  Cross Border Bioenergy supports the
bioenergy industry in going international
      to diversity its sales markets
Interested in the Cross Border Bioenergy Project?

This project is designed to help SMEs to evaluate markets in Europe
and support their decision-making process to invest in them.
Join the Cross Border Bioenergy network and benefit from exclusive
information on European markets. There are absolutely no cost
associated with the use of the network.


                          The Cross Border Bioenergy project is supported by the Intelligent Energy Eurrope
                          programme (IEE/09/933/S12.558306)

The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect
the opinion of the European Union. Neither the EACI nor European Commission are responsible for any use
that may be made of information contained therein.
                                   EU Handbook -
                                    CHP Markets
    Prepared by the Cross Border Bioenergy Working Group
                                             on CHP technologies

Project Coordinator
       EuropEan Biomass association (aEBiom)
       Mr. Jean-Marc Jossart
       Phone: +32 (0) 24 00 10 61

Project Partners
       austrian Biomass association (aBa)                                Danish BioEnErgy association (Di BioEnErgi)
       Mr. Christoph Rosenberger                                         Mrs. Kristine van het Erve Grunnet
       Email:                             Email:
       Phone: +43 (0) 1533 07 97 25                                      Phone: +45 (0)33 77 33 69
       Website:                                   Website:

       BioEnErgy association         of    finlanD (finBio)              gErman BioEnErgy association (BBE)
       Mrs. Mia Savolainen                                               Mr. Thomas Siegmund
       Email:                                   Email:
       Phone: +358 40 7182026                                            Phone: +49 (0) 228 81 00 223
       Website:                                            Website:

       hungarian Biomass compEtEncE cEntEr                               italian agroforEstry EnErgy association
       (hBcc)                                                            (aiEl)
       Mr. Imre Németh; Email: obekk[at]                       Mrs. Annalisa Paniz; Email:
       Phone: + 36 (0) 28 420-291                                        Phone: +39 (0) 49 88 30 722
       Website:                                  Website:

       latvian BioEnErgy association (latBionrg)                         slovak BioEnErgy association (skBiom)
       Mr. Didzis Palejs                                                 Mr. Josef Viglasky
       Email:                                 Email:
       Phone: +371 (0) 675 22 399                                        Phone: +421 (0)45 5206 875
       Website:                                         Website:

       swEDish BioEnErgy association (svEBio)
       Mrs. Lena Dahlman
       Phone: +46 (0) 8 441 70 83

Consulting Partners
       EclarEon consultants
       Mr. Christian Grundner
       Phone: +49 (0)30 246 286 93

       impErial collEgE for sciEncE, mEDicinE                 anD
       tEchnology (icEpt)
       Mr. Arturo Castillo-Castillo; Email:,
       Phone: +44 (0)20 7594 7312
                              Table of Content

Glossary                                                               4

1. Introduction to the Market                                          5

    1.1. Aim and Methodology of the Cross Border Market Handbook . . 5

    1.2. Introduction to CHP . . . . . . . . . . . . . . . . . . . . . 6

2. Comparison of European Countries                                    9

    2.1. Cross Border Scores of EU Countries . . . . . . . . . . . . . 9

    2.2. Basic Country Data . . . . . . . . . . . . . . . . . . . . . 10

    2.3. Energy Policy . . . . . . . . . . . . . . . . . . . . . . . . 12

    2.4. Feedstock Potential . . . . . . . . . . . . . . . . . . . . . 15

    2.5. Business Cases . . . . . . . . . . . . . . . . . . . . . . . 18

    2.6. Market Environment . . . . . . . . . . . . . . . . . . . . 23

    2.7. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 25

    2.8. Project Financing . . . . . . . . . . . . . . . . . . . . . . 26

    2.9. Readiness for Uptake . . . . . . . . . . . . . . . . . . . . 28

3.Country Attractiveness - In Depth Analyses                          30

    3.1. Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

    3.2. Germany . . . . . . . . . . . . . . . . . . . . . . . . . . 43

    3.3. Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

    3.4. Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . 72

    3.5. Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . 82

    3.6. Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . 96

    3.7. Latvia . . . . . . . . . . . . . . . . . . . . . . . . . . 106

    3.8. Finland. . . . . . . . . . . . . . . . . . . . . . . . . . 119

4. Annex                                                            132

                      BBE - Bundesverband BioEnergie                KÁT - Hungarian Mandatory Reception
                      BEE - Federal          Renewable    Energy    and Price System
                      Association                                   NEAP - National Energy Action Plan
                      BMU - Federal Ministry for the                NFM - Hungarian Ministry of National
                      Environment, Nature Conservation and          Development
                      Nuclear Safety                                nREAP - National Renewable Energy
                      CHP - Combined Heat and Power                 Action Plan
                      CWE - Central-Western European Market         ÖNACE - Austrian Classification      of
                      DBFZ -      German     Biomass     Research   Economic Activities of Companies
                      Center                                        PPP - Polluter Pays Principle
                      DEA - Danish Energy Agency                    PSO - Public Service Obligation
                      DERA -      Danish     Energy    Regulatory   RENERGIE - Raiffeisen Management
                      Authority                                     Gesellschaft für erneuerbare Energie
                      DH - District Heat                            GmbH

                      EEA - European Environmental Agency           RES-E - Renewable Energy Sources
                      EEC - Energy Efficiency Credit
                                                                    RES - Renewable energy sources
                      EEG - Renewable Energy Act
Market Handbook CHP

                                                                    RS - Renewable sources
                      EIB - European Investment Bank
                                                                    Saeima - Parliament of the Republic of
                      EMCC - European          Market    Coupling   Latvia
                                                                    SRC - Short Rotation Coppice
                      ERM - Exchange Rate Mechanism
                                                                    TGCs - Tradable Green Cetificates
                      EMU - European Monetary Union
                                                                    TPES - Total Primary Energy Supply
                      EMS - European Monetary System
                      FIFC - International Finance Coporation
     4                FiT - Feed-in Tariff
                      FNR - Federal Agency for Renewable
                      GC - Green Certificates
                      GHG - Greenhouse Gas
                      IEA - International Energy Agency
                      IED - Industrial Emissions Directive
1. introdUCtion             to thE    markEt

1.1. aim and mEthodoloGy of thE               interesting upcoming events.
Cross BordEr markEt handBook                  To achieve these goals the consortium
                                              of the Cross Border Bioenergy project
The general objective of the Crossborder
                                              undertook a detailed study of the five
Bioenergy project is to help SMEs to
                                              different bioenergy markets in Europe.
evaluate bioenergy markets in Europe
                                              Under participation and contribution of
in view of cross-border investments,
                                              many international bioenergy companies
thereby making SMEs less dependent on
                                              and stakeholders, the consortium
fluctuating domestic market conditions
                                              identified about 50 relevant criteria and
and strengthening the whole bioenergy
                                              summarized them in 8 main categories.
industry. Five different bioenergy market
                                              The 8 categories cover the important
sectors are considered: biogas, small
                                              factors    influencing  the    bioenergy
scale heating, district heating, CHP and
                                              sectors, namely:
biofuels for transportation. The project
will contribute to member states’ efforts     • Basic Country Data
to reach their targets set in the RES         • Energy Policy
directive, to benchmark national RES
action plans, and possibly to implement       • Feedstocks
flexibility projects as mentioned in the      • Business Case
RES directive.                                • Market Environment
With this project bioenergy companies         • Regulation

                                                                                          Market Handbook CHP
will get a ‘navigator’ on potential markets
in Europe, and get necessary tools to         • Project Financing
develop a market entry strategy. The          • Readiness for Uptake
GIS-Tool helps bioenergy companies
                                              The identified criteria are concretized
in comparing European markets and,
                                              by more than 300 indicators, which are
based on this comparison, in defining
                                              weighted according to their respective
possible target markets. Following this
                                              importance. By doing so, scores for
first step the market handbooks offer
                                              each indicator, criterion and category
more detailed information about single
                                              as well as an overall sector score
countries and regions in Europe and                                                            5
                                              were generated. To ensure scientific
furthermore, describe and explain the
                                              reliability the Imperial College London
situation in the different bioenergy
                                              was obliged with working out a sound
markets in Europe. The B2B-plattform
                                              methodology defining the scoring and
can support direct action by facilitating
                                              weighting mechanisms. A method was
contact      and     networking     between
                                              worked out to process these criteria
bioenergy stakeholders and companies.
                                              and find appropriate indicators, and a
In this section of the website, furthermore
                                              comprehensive template was produced.
concrete offers and inquiries can be
posted and a calendar informs about           The results that are presented in this
                                                                  same plant, generally using a gas turbine
                                                                  with heat recovery. Heat delivered from
                                                                  CHP plants may be used for process or
                                                                  space-heating purposes in any sector
                                                                  of economic activity including the
                                                                  residential sector. CHP thus reduces the
                                                                  need for additional fuel combustion for
                                                                  the generation of heat and avoids the
                                                                  associated environmental impacts, such
                                                                  as CO2 emissions. The project focuses
                                                                  on solid biomass CHP plants with a
                                                                  minimum capacity of 500 kW thermally
                      handbook and on the website are based       (kWth).
                      on official statistics, national action     In the past years the waste heat from
                      plans, support schemes and furthermore      electricity generation was very often
                      on direct information gathered from         not used, whereas the pure electricity
                      bioenergy experts from the single           production was predominant. Meanwhile
                      countries in interviews and enquiries       in many member states there is a
                      undertaken especially for this project.     minimum utilization ratio of heat for new
                      As many different reliable sources have     plants. Plants without a thermal use are
                      been included in the research process,      difficult to present economically due to
Market Handbook CHP

                      the results offer a comprehensive picture   their overall energy yield. Another reason
                      of the bioenergy markets in Europe.         for the minimum efficiency criteria is the
                      The full list of categories, criteria       finite nature of the resource biomass.
                      and indicators chosen for the biogas        CHP plants should operate mostly on a
                      sector is available in the biogas sector    heat-controlled basis. Only through this
                      handbook, provided for download at          a high overall efficiency can be reached
                   under     and the biomass-fuel can be used in the
                      the rubric ‘publications’. The annex        best possible way.
                      furthermore provides a table containing     Through the use of RES, CHP plants
     6                the leading questions on the basis of       show a higher CO2 saving potential and
                      which the market handbook was built up      they should be integrated mainly in a
                      on.                                         decentralized way due to their relatively
                                                                  low energy density of the solid fuel.
                      1.2. introdUCtion     to   ChP              The key technologies of the sector
                      Combined heat and power (CHP) or            are combustion or gasification of solid
                      co-generation is a technology used to       biomass and generation of power.
                      improve energy efficiency through the       For combustion there are several
                      generation of heat and power in the         technologies available. In the power
range of 0.5 until >100 MW mostly grate
firing systems, fluidised bed combustion
systems or jet blower firing systems are
Solid biomass was sometimes overlooked
and lives under the shadow of the
photovoltaic and wind industries, yet it is
a giant terms of socioeconomic impacts.
The increased use of solid biomass (+8
% in the EU in 2010) underlined its
crucial role in creating turnover in the
member states. Investments are made
for the installation of CHPs plants and the
accompanying equipment and the sale of
biomass boilers, furnaces or stoves for
individual households. Furthermore, the
forestry sectors is a major employers.
Here the raw materials produced and
delivered to the end-users. Biomass-
conversion technologies dual uses as
both electricity and heat is a major

                                              Market Handbook CHP
asset, together with the multitude of
forms taken by biomass – wood chips,
timber, pellets, sawdust, logwoods, pulp

    Sector handbook biogas
2. ComParison              of   EUroPEan CoUntriEs

2.1. Cross BordEr sCorEs            of   EU CoUntriEs
           Top Ten Country Scores - CHP

 The Top Ten Country Score gives an overview of the ten most attractive countries in the CHP
 sector. All indicators are included in this overall score, which can be a first indicator of attrac-
 Source: all tables and figures that are not cited otherwise are based on datat from the CBB pro-

                                                                                                        Market Handbook CHP
 ject: (November 2011)

                                                      „Overall attractiveness of European Countries
                                                      for CHP“

                                                      The map displays the overall attractiveness of
                                                      the EU 27-member states‘ CHP markets. The
                                                      darker the green, the higher the attractiven-
                      2.2. BasiC CoUntry data
                      The analysis of the countries‘ basic data is based on the analysis of the geographical
                      and climatic conditions, demography and logistical infrastructure. The figure below
                      shows the CBB basic data score for all European Countries.

                                                                                          ‚Scoring of the
                                                                                          Countries‘ Basic
Market Handbook CHP

                      Northern Region (Austria, Belgium,          stimulus to their greatly liberalised
                      Denmark, Finland, Germany, Ire-             markets. Such complexity can act as an
                      land, Netherlands, Sweden, UK)              entry barrier and also as a cost penalty
                                                                  for new entrants who need to invest to
   The Northern Region contains some                              understand the system.
   of Europe’s biggest CHP countries,
   including the leader in CHP, Denmark. In                       Belgium (Flanders) and Germany are
   some of these countries there is already                       the two EU Member States which have
   a penetration of CHP in their electricity                      shown convincing promotion systems
   supply system of over 20%. In the                              of CHP. The support mechanisms in
10 Nordic countries (Denmark, Finland,                            these countries lead to advantages that
   Sweden), the support of fossil CHPs is                         result in increased rate of returns of up
   limited, since the focus already shifted                       to 10%. However, this is not the case
   to renewable and low carbon solutions.                         for large plants in Germany since this
                                                                  part of the market is not progressing at
                      In the remaining countries of the           a parallel pace to the smaller systems
                      region some very complicated support        where stimulus is clear.
                      mechanisms exist, since the national
                      governments of these markets only           A common theme across the members of
                      tend to install the minimum required        the Northern Region is the combination
                                                                  of capital support (through grants or
tax liability reduction) with generation/      Bulgaria and Romania, have made
power export support.                          considerable investments in district
Eastern Region (Czech Republic,                heating, some with CHP; in Greece and
Estonia, Hungary, Latvia, Lithuania,           Cyprus district heating applications have
Poland, Slovakia, Slovenia)                    remained at a limited stage and CHP in
                                               general has not become a prominent
Feed-in tariffs (FiTs) and bonuses on          method. None of the countries in this
electricity are the strongest promotional      region have support mechanisms in
support for CHP that is used in all            place that encourage micro-CHP or
countries. Even though the details             smaller building and small process sites.
of FiTs in terms of range covered,             In general, the profitability of CHP
period, setting, etc. differ amongst           across this region is heavily affected
countries, the consistent choice of FiTs       by the relatively low level of market
might be regarded as an indicator that         liberalisation. The electricity supply
governments of the Eastern Region still        price data for Bulgaria, for example
tend to manage their electricity markets       shows that the electricity price is lower
to a certain extent whilst full market         than the basic fossil fuel price. Market
liberalisation still lies ahead.               liberalisation issues in Greece affect
In countries, such as Slovenia, Slovakia,      market access and competition with
Czech Republic, Hungary, where end             regards to basic fuel. Despite support
user electricity prices are average/           mechanisms which could stimulate the

                                                                                             Market Handbook CHP
higher, market oriented FiTs that grant        market in Greece, the bureaucracy for
premiums on all generated electricity are      obtaining permits from many different
the most successful mechanisms. These          state organisations are time consuming
countries have witnessed the fastest           and act as an entry barrier for new
recent development (except Slovenia with       participants. The volatility of fuel prices
new support from 2010). For the Baltic         and the frequent changes in policy
countries, that are still characterised by     structures concerning the electricity and
very low wholesale prices and lower end        CHP market in recent years also add to
user prices, a fixed purchase price as         the investment risk.
support seems to be the more suitable          South Western Region (France,                  11
option. A fixed purchase price is a good       Italy, Luxembourg, Malta, Portugal,
option to support the competitiveness of       Spain)
district heating plants on the electricity
market.                                        Similarly to the Northern Region, the
                                               markets of the countries in the South
South Eastern Region (Bulgaria, Cy-            Western region are relatively liberalised.
prus, Greece, Romania)                         This means that the support mechanisms
There are two quite separate experiences       tend to be complex and tend to reflect
of CHP in this region: two of the countries,   the structure of the market with gas and
                      electricity prices built up in tranches.     mean that in reality investment are
                      Even though the supported Renewable          merely targeted at the replacement
                      Energy Europe (IRR) in France and Italy      of plants. In Italy additional costs for
                      benefit from an uplift by well over 10%,     cogenerators, local legislation and local
                      these markets do not show the expected       taxes restrict the development and add
                      growth. In France, the limited application   risk costs to this basic IRR calculation.
                      and duration of new support contracts
                      2.3. EnErGy PoliCy
                      The Energy Policy category analyzes
                      how ambitious are the NREAPs, the
                      appropriate mesures proposed by
                      country and the political will to develop
                      the RES-sector; On the base of these
                      results the Cross Border Bioenergy
                      consortium score the EU countries, the
                      result of this scoring are showed in the
                      graph below.
                      There is a significant potential for the
                      development of RES-electricity in the
                      EU, and the use of biomass to produce
Market Handbook CHP

                      electricity can substantially contribute
                      to increase the share of RES in the
                                                                    ‘NREAP scoring’


                        ‘Scoring national energy policy’
                                                                                     Market Handbook CHP


EU energy mix. The EU has addressed       energy from renewable sources (RES
this sector through policy initiatives,   Directive), adopted by the European
predominantly by setting targets for      Parliament in December 2008 and
the promotion of the use of biomass in    officially endorsed by the Council in
electricity.                              April 2009 on the promotion of the
With the directive for the promotion of   use of energy from renewable source
                                          (RS), significant regulatory measures to
   promote the biomass use for electricity        According to the IEA’s Deploying
   production are imminently to become EU         Renewables report (2008), the most
   law. The mandatory EU target of 20% by         successful countries in deploying biomass
   2020 and the individual national targets       electricity are the Netherlands, Sweden,
   provide a stabilizing mechanism for            Belgium and Denmark (for 2000–2005).
   electricity markets and incentives for the     The case of solid biomass is a good
   development of biomass technologies            example for showing that different types
   within the EU. The biomass industry is         of incentive schemes can be effective. In
   expected to contribute over half of this       Sweden, for instance, quota obligation
   overall EU target, roughly 12%, through        systems have shown good results at a
   the applications of biomass in transport,      moderate cost, while in Belgium, the
   electricity and in heating. As far as          quota obligation system has encouraged
   biomass for electricity is concerned,          biomass deployment at a high cost. The
   it is expected to contribute 250 TWh/          highest growth in biogas generation for
   year by 2020. Under the RES Directive,         2000–2005 was observed in Germany,
   EU countries are required to take ‘the         the UK and Luxembourg. Germany and
   appropriate steps to develop transmission      Luxembourg applied a feed-in tariff
   and distribution grid infrastructure,          support scheme, and the UK a quota
   intelligent networks, storage facilities and   obligation system with tradable green
   the electricity system’ to help develop        certificates. Besides the UK, Italy’s quota
   renewable electricity (including biomass       obligation system has shown some of
Market Handbook CHP

   for electricity).EU countries must also        the highest effectiveness levels, with
   speed up authorization procedures              strong growth in both countries being
   for grid infrastructure and ensure that        mainly based on an expansion of landfill
   transmission system operators, and             gas capacity, thus producing methane
   distribution system operators guarantee        which is cheap compared to other biogas
   the     transmission    and    distribution    feedstock.1
   electricity generated from biomass and         Useful link:
   provide for either priority access to
   the grid system or guaranteed access.          • ‘Energy Website’ of the European Co-
   This ensures easier access for biogas          mission. The site offers information on
14 and biomethane to the electricity grids        energy policies. An up-to-date coverage
   and to the gas pipelines. Prior to the         of EU energy is also available on the po-
   RES Directive, the RES-E Directive set         licies and activities pages of Europa.
   national targets for renewable electricity
   and led to the establishment of specific
   feed-in tariffs for electricity from all
   RES, including biomass in most of the
   EU member states, and tradable green
                                                  1 European Renewable Energy Council (EREC):
   certificate schemes in five EU countries.      Renewable Energy in Europe – Markets, Trends and
                                                  Technologies, 2010
2.4. fEEdstoCk PotEntial

This category analyzes the feedstock potential to enable CHP projects. The graph
below shows the scores for all EU countries

   Scoring ‘Feedstocks’

                                                                                   Market Handbook CHP
The theoretical potential of biomass for
energy in Europe is much bigger than its
present use; however, this potential first
has to be developed by activities at the
local, regional, national and international
So far, forest based biomass is the
main biomass fuel provider with the                                                15
maximum forest fuels potential of 543
million m3 (94.6 Mtoe) in the EU, which
covers logging residues that make up
251 million m3 (43.73 Mtoe). Logging
residues have the highest potential
to increase the forestry fuels used for
bioenergy production.
By-products     of   wood   processing        Scoring ‘Biomass Potential’
industries will also play an important
     Market Handbook CHP

role. For example, refined fuel pellets       of arable land in Europe. If 5% of this
account for 6.6 Mtoe (in 2005 and 7.5         land were used for energy crops, a yield
Mtoe in 2007) of which 3.3 Mtoe are           of 10 tons of solid dry matter per hectare
used for electricity and 3 Mtoe for heat      could provide 22.8 Mtoe of energy if
production.                                   combusted completely, or 18.2 Mtoe if
Pellets had a 3% share in the bioenergy       converted into biogas. As not all biomass
production in 2005. Nevertheless, the         compounds (especially lignin) can be
potential estimated for 2020 is much          digested, a general conversion efficiency
higher and could reach 14% bioenergy          of 80% is assumed. According to a study
production with 25 Mt pellets (10 Mtoe)       of the EEA of 2006, around 10,5% of
used for bio-electricity and 50 Mt (21        Europe’s gross energy consumption
Mtoe) for heat production.                    (9.5% of final energy demand) in
                                              2020 could be met with biomass alone
Nevertheless, the agricultural sector has     (compared to 4.5% of gross energy
the greatest potential and could become       demand in 2005), if all the theoretical
the most important energy supplier            potential was realized. Respectively, 16%
by 2020. Out of numerous biomass              of the EU-27 gross energy demand would
fuels, dedicated energy crops, such           be met by bioenergy in 2030. Bioenergy
as willows, poplars, miscanthus, reed         would meet 18.1% of European demand
canary grass etc. used for heating and        for heat, 12.5% of electricity demand,
electricity production have enormous          and 5.4% of transport fuel demand
potential to increase the use of biomass

                                                                                                 Market Handbook CHP
                                              (corresponding to 7% of the diesel and
by increasing the yield per hectare. So       gasoline demand in road transport).
far, there are only about 60,000 ha of
land planted with such crops whereas          The potential for pellet production is very
2.5 million ha of land are planted with       large. The raw material includes wood
traditional energy crops.                     residues, wood from forest thinning
                                              and short rotation coppicing, as well
Biogas also has a huge potential. The         agricultural residues. Due to this great
production of biogas reached 7 Mtoe           diversity of feedstock, a 2020 target of
in 2008. Considering the available            60 to 80 million tons of pellets appears
resources, such as manure, organic            to be feasible. In 2008, more than 440              17
wastes, by-products, and crop residues,       pellet plants in Europe produced about
the theoretical biogas potential reaches      7.5 million tons of pellets per year
up to 60 Mtoe by 2020 (if 5% of               securing a reliable supply. The number
agricultural land and all available manure    of plants is increasing continuously due
is being used). Nevertheless, the realistic   to the dynamic market development.2
potential is more likely to be around 30
Mtoe with 2.5% of agricultural land used
and half of the available manure utilized.    2 European Renewable Energy Council (EREC):
Presently, there are about 114 million ha     Renewable Energy in Europe – Markets, Trends and
                                              Technologies, 2010
                      2.5. BUsinEss CasEs
                      The business case analyses economic conditions which are based on the price levels,
                      subsidies guarantees and support schemes that can affect the viability of specific
                      bioenergy technology applications; the graph below shows the scores of all EU
                      countries in this category.
                        Scoring ‘Business Case’
Market Handbook CHP

   Many industries, organizations and research                   legislation on promoting energy from
   bodies are involved in the biomass-based                      RS, the biopower industry has a huge
   electricity sector, which is scattered and                    growth potential. Biomass used for
   very diverse in size. As a result, there                      the generation of electricity will play a
   is currently no bioenergy community or                        vital role in achieving the 20% share
   bioenergy industry in Europe as such. The                     of renewable energy by 2020. Both,
   sector crosscuts the forestry, agriculture,                   government and industry, have already
   chemical, food, feed, power and heat                          been investing in innovative biomass
18 industries. It is therefore an oxymoron to                    based power generation. In the long
   speak of a ‘bioenergy industry’. However,                     term cooperation will be necessary in
   in order to generally classify this sector,                   order to fulfil the long term objectives.
   the term ‘biopower’ industry could be used                    The EU’s Bioenergy Industrial Initiative,
   to define biomass utilized for electricity                    which is currently being prepared in
   production. Unstable fuel prices and an                       coordination of the Biofuels Technology
   increase in energy demand have rendered                       Platform and other Biomass Associations,
   the power generation from biomass                             is one tool that will help to secure the
   more economically competitive than ever                       long term objectives if it runs in close
   before. Combined with the recent EU                           cooperation with the EU Commission
 Scoring ‘Operation Support Schemes’           Scoring ‘Biomass Prices’

and other industry stakeholders. The         generation from biomass, which is
industry has to take a leading role          particularly relevant for power utilities.

                                                                                            Market Handbook CHP
regarding innovation in biomass based        Traditional    electricity   utilities  will
power technologies and their subsequent      continue to look at co-firing and at plants
deployment. Technological innovation will    operating on biomass by 100%. Due to
be crucial for the future of the industry;   their small size, dedicated biomass power
in the meantime, however, solutions have     plants are more expensive than co-firing
to be found that use existing technologies   plants. Nevertheless, dedicated biomass
in an economic attractive way. The power     plants and dedicated biomass CHP
industry and utilities need to invest in     plants are becoming more economically
biopower, as today’s investment decisions    viable. With growing landfills, waste-to-
will define the energy supply of the next    energy has become one of the booming            19
generation. Co-firing is the technology      sectors in biopower generation. Despite
with the largest growth potential in the     recycling and waste reduction schemes,
power sector and it is also the most cost-   waste-to-energy is seen as the most
effective method for large-scale power       viable large-scale alternative to landfills.

 CHP subsidies (in % of investment)
                                                                of this market can be explained by its
                                                                revalorization through feed-in tariffs,
                                                                the green certificate trading systems,
                                                                and EU quotas.
                                                                The table ‘Gross Electricity Production’
                                                                shows the gross electricity production
                                                                from biogas in the EU in 2006 and 2007.
                                                                It is very likely that the most critical
                                                                non-technical barrier to bioenergy is the
                                                                availability of resources that are needed
                                                                in order to ensure continuous long-
                                                                term supply at a reasonable cost for the
                                                                market users. The supply with resources
                                                                is a key factor for bioenergy. It is crucial
                                                                to develop a sustainable supply chain
                                                                for biomass feedstock for the biopower
                      Scoring ‘Feed-in tariff for electricity   industry, and for biomass for heating
                      from solid biomass CHP plants of <2       purposes. Sourcing adequate supplies of
                      MW capacity                               feedstock will be the biggest challenge
                                                                facing the future of the bioenergy
                                                                industry, as competition for supplies is
Market Handbook CHP

                                                                getting fiercer. Bioenergy is going to
   The biogas sector will experience growth                     commoditize quickly and must make use
   as traditional gas utilities will have to                    of all the outputs from its feedstock.
   increase their shares of renewable                           Looking 10 or 20 years ahead, there will
   energy. Upgrading biogas to the quality                      be a pull on the entire
   of natural gas and injecting it into the
   natural gas grid is a renewable option                       biomass supply chain from a number
   for gas utilisation. In the coming years,                    of sectors – energy, biofuels, and bio-
   treatment prices are expected to fall due                    renewable chemicals for example.
                                                                Hence, the industries from the food,
20 to economies of scale and also due to the
   economic downscaling of the upgrading                        agriculture, energy, oil and forestry
   facilities so as to fit the modular biogas                   sectors must come together to create
   plants existing in countries such as                         a secure and reliable feedstock supply
   Germany and Austria. Industrialists are                      chain in order to ensure the growth of a
   more and more interested in the biomass                      future bioenergy industry. 3
   CHP market, while this market is currently                   Promotion instruments can be classified
   much more developed in the very high
   capacity sector (industrial boilers of the                   3W European Renewable Energy Council (EREC):
   forestry sector). The increased importance                   Renewable Energy in Europe – Markets, Trends and
                                                                Technologies, 2010
                                             Feed-in tariffs (FITs) are generation-
                                             based, price-driven incentives. The
                                             price per unit of electricity that a utility,
                                             a supplier, or a grid operator is legally
                                             obligated to pay for electricity from RES-E
                                             producers is determined by the system.
                                             Thus, a federal (or provincial) government
                                             regulates the tariff rate. It usually takes
                                             the form of either a total price for RES-E
                                             production, or an additional premium on
                                             top of the electricity market price paid to
                                             RES-E producers. Apart from the level
                                             of the tariff, its guaranteed duration
                                             represents an important parameter for
                                             assessing the actual financial incentive.
                                             FITs allow technology-specific and
                                             band-specific promotion as well as
 Scoring ‘Feed-in tariff for electricity     an acknowledgement of future cost-
 from solid biomass CHP plants of <10        reductions by implementing decreasing
 MW capacity                                 tariffs (see, e.g. the German Renewable
                                             Energy Act).

                                                                                             Market Handbook CHP
                                             Quota obligations based on Tradable
according to different criteria (i.e.        Green Certificates (TGCs) are generation-
whether they affect the demand or the        based, quantity-driven instruments. The
supply of RES-E, or whether they support     government defines targets for RES-E to
capacity or generation). A common            be installed and obliges any party of the
terminology can be applied at least          electricity supply-chain (e.g. generator,
within this handbook in order to provide     wholesaler, or consumer) to fulfil these
a classification of these instruments that   targets. Once defined, a parallel market
covers all the strategies referring to the   for renewable energy certificates is
promotion of RES-E deployment that are       established and their price is set according    21
currently applied. A brief explanation of    to demand and supply conditions (forced
the terminology is provided below for        by the obligation). Hence, for RES-E
instruments of high relevance.               producers, financial support may arise
                                             from selling certificates in addition to
Investment incentives establish an
                                             the income from selling electricity on
incentive for the development of RES-E
                                             the power market.
projects as a percentage of total costs,
or as a predefined amount of Euro per        Production tax incentives are generation-
installed kW. The level of incentive is      based, price-driven mechanisms that
usually technology-specific.                 work through payment exemptions from
                      electricity taxes applied to all producers.
                      This type of instrument, thus, differs
                      from premium feed-in tariffs
                      solely in terms of the cash flow for RES-E
                      producers: it represents an avoided cost
                      rather than an additional income.
                      Tendering systems are quantity-driven
                      echanisms.    The     financial    support
                      can either be investment-focused or
                      generation-based. In the first case, a
                      fixed amount of capacity to be installed
                      is announced and contracts are given
                      following a predefined bidding process
                      offering winners a set of favourable
                      investment      conditions,      including
                      investment subsidies per installed kW.
                      The generation-based tendering systems
                      work in a similar way. However, instead
                      of providing up-front support, they offer
                      support in the size of the ‘bid price’ per
                      kWh for a guaranteed duration.
Market Handbook CHP

   As the regulatory instruments described
   above, more and more voluntary
   approaches have emerged with on-going
   market liberalisation. They are mainly
   based on the willingness of consumers to
   pay premium rates for renewable energy.
   However, in terms of effectiveness so far
   – i.e. actual installations resulting from
   their appliance – their impact on total
   RES-E instalment is negligible. 4

                      4 Summary report ‚Monitoring and evaluation of
                      policy instruments to support renewable electricity
                      in EU member states’; a research project funded by
                      the German Federal Ministry for the Environment,
                      Nature Conservation and Nuclear Safety; Institute
                      Systeme and Innovation Research and Energy Eco-
                      nomics Group; 2005
2.6. markEt EnvironmEnt
The graph below shows the EU countries´scores as a result of the analysis of the
energy market dimensions in these countries. The consortium of the Cross Border
Bioenergy project analyzes here the energy market, the transferable technologies,
the logistics and access to the customer base through established networks.

      Scoring ‘Market Environment’

                                                                                            Market Handbook CHP
Europe is assisting the expansion            electricity, heat and steam necessary
of biomass use for power and CHP             for industrial processes, they generate
generation. Austria, Germany, the UK,        surplus electricity that can be fed into the
Denmark, Finland and Sweden are              grid. Due to incentive schemes that have
leading this process, mostly producing       been installed recently in those countries
bio-electricity from wood residues in co-    (guaranteed feed-in tariffs, call for tender
generation plants. A large part of these     procedures and green certificates), new        23
yields come from power plants belonging      power plants have been implemented
to the lum                                   using biomass over the last few years.
ber and wood pulp (paper and chipboard       Eurobserv’Er observed a slow-down in
panels) industry. Waste products, such       solid biomass electricity growth in 2007
as black liqueurs, wood waste, bark or       (+4.4% with respect to 2006, in other
sawdust, are also treated internally in      words, an additional 2.1 TWh) after the
large-scale power plants in CHP operation,   strong growth in the previous two years
which can use biomass alone, or mix it       (+11.4% between 2004 and 2005 and
with other fuels. As well as producing       +13% between 2005 and 2006). CHP
                      systems remain the principle technology
                      used to produce electricity from solid
                      biomass, representing three-quarters
                      (76.8%) of total electricity production
                      in 2007. See table ‘Country Comparison’
                      below for an overview of gross electricity
                      production in 2006 and 2007, and Figure
                      ‘Development Bioelectricity’ for the
                      overview of the development of the bio-
                      electricity sector compared to other
                      renewables up to 2007.
                      In the EU, both the primary production
                      of biogas and the gross electricity
                      production from biogas increased by
                      almost 18% between 2006 and 2007.
                      The greatest share of this growth was
                      achieved in Germany. German biogas
                      companies also expanded their business          Scoring ‘Energy sector volume’
                      in 2008, despite rising biomass costs.
                      Small-scale electricity production is one
                      of the strong assets of biogas use as
Market Handbook CHP

                      this co-generation is very effective with
                      regard to the ratio of heat and power.5
                      5   European Renewable Energy Council (EREC):

2.7. rEGUlation
This category refers to additional mandates, rules and authorisation procedures
that have an impact on the stability and practicality on operations in the bioenergy
industry such as efficiency standards or pollution limits. This category was only
analyzed in those countries that participated in the Cross Border Bioenergy project
consortium: Austria, Germany, Denmark, Hungary,Latvia, Finland, Italy, Sweden and
Slovakia. Estonia, Lithuania, Slovenia and Romania were also analysed but in less


                                                                                       Market Handbook CHP
In March 2007, the heads of state and
governments of the 27 EU member
states adopted a binding target of
20% renewable energy of final energy
consumption by 2020. Combined with
commitment       to   increase    energy
efficiency by 20% until 2020 and to                                                    25
reduce GHG emissions by at least 20%
within the same period (or respectively
30% in case of a new international
agreement), Europe’s political leaders
paved the way for a more sustainable
energy future. In January 2008, the
European Commission presented a draft
directive for the promotion of the use of   Scoring ‘Introduction of regulatory
energy from RES which contains a series     instruments in favour of bioenergy’
                      of elements to create the necessary                Council at the end of March 2009. It was
                      legislative framework for making the set           published in the Official Journal in June
                      targets become reality. The Directive              2009 and will now have to be transposed
                      sets the legislative framework that should         into national law. By June 2010, member
                      ensure an increase of renewable energy             states will need to submit national action
                      of the total energy consumption from               plans on how they foresee reaching their
                      8.5% in 2005 to 20% in 2020. If this gets          binding national target. In order to reach
                      properly transposed into national law, it          the binding overall 20% target outlined
                      will become the most ambitious legislation         in the RES Directive, the development
                      on renewable energy in the world. The              of all existing RES and a balanced mix
                      RES Directive (DIRECTIVE 2009/28/                  in the sectors of heating and cooling,
                      EC) was approved by the European                   electricity, and transport are needed.6
                      Parliament in December 2008 and by the
                                                                         6   European Renewable Energy Council (EREC):

                      2.8. ProjECt finanCinG
                      This category addresses elements of export feasibility such as a good credit market
                      in the country, good conditions as a target for export as reflected in the Euler-Hermes
                      Rating for instance. The graph below shows the scores for all the EU countries.
Market Handbook CHP


                         Scoring       ‘Financing ’

                      The principal debt financier in the                have accessed debt capital markets,
                      European renewable energy sector has               but the depth in the institutional market
                      been the banking sector. A few projects            is relatively low compared to the US
                                                                         institutional market, where projects in
                      Renewable Energy in Europe – Markets, Trends and   the energy and infrastructure sector
                      Technologies, 2010
                                             loans to the RES sector reached over €4
                                             billion in 2009, have filled a void on the
                                             project finance market and significantly
                                             increased their involvement in RES
                                             Capital availability in the renewable
                                             sector from banks is influenced by a
                                             number of factors: 7
                                             1. Capacity of banks to lend long-term
                                             to the renewable energy sector;
                                             2. Ability of banks to recycle the loan
                                             capital through secondary loan markets
                                             to other long term institutional lenders,
                                             such as pension funds, insurance funds
                                             or other capital markets (through
  Scoring’Standard and Poor’s Rating
                                             financial mechanisms through project
                                             loan securitizations etc.);
                                             3. Impact of bank regulations on asset-
have accessed debt capital markets. The      liability mismatches.
situation has been exacerbated by the

                                                                                                  Market Handbook CHP
impact of monolines. Almost all previous     Useful links:
capital market issuances in the renewable    • ‘ManagEnergy’ is a technical support
energy sector have been insured by the       initiative of the Intelligent Energy – Eu-
monoline insurers who had AAA credit         rope (IEE) programme of the European
ratings. Therefore, the investors in the     Commission which aims to assist actors
capital market debt issued by renewable      from the public sector and their advisers
energy projects, benefited from the AAA      working on energy efficiency and rene-
credit ratings of the monolines and took     wable energy at the local and regional
substantial comfort from those ratings       level.
without having to review the complex                                                              27
renewable energy project structures.
Post-crisis, most of these monolines
have lost their AAA credit ratings thereby   • COGEN      CHALLENGE      Consortium
removing a source of insurance cover         (2006): ‘COGEN CHALLENGE - Get your
that the debt capital market investors       cogeneration project financed: guidance
can take comfort from. As a result           document on third party financing of
from the financial crisis from mid 2008      small-scale cogeneration’
onwards, multilateral banks, such as the     7 Financing Renewable Energy in the European En-
European Investment Bank (EIB) whose         ergy Market – Final Report – by Ecofys, Fraunhofer
                                             ISI, TU Vienna EEG, Ernst & Young; 2011
                      2.9. rEadinEss    for   UPtakE
                      This category was only analyzed for the countries partners of the CBB project. It
                      includes the availability of support these countries, such as industry associations and
                      it also reflects the reality of the potential customer base in terms of suitable awareness
                      about and willingness to adopt technology, which in turn relates to maturity of the
Market Handbook CHP

                         Scoring ‘Readiness for Uptake’

     The EU aims at generating 21% of                                balanced sharing of the costs related to
   its electricity from RES by 2010. The                             grid connection need to be addressed.8
   Directive 2001/77/EC formulates this                              Growth of electricity output from solid
   target on the promotion of renewable                              biomass in particular has been steadily
   electricity. While some member states,                            increasing by an average of 14.7% per
   such as Germany, Spain and Denmark are                            annum since 2001 resulting in a rise from
28 well on track to reach their targets, the                         20.8 to 62.2 TWh in 2009 (see Table ‘Solid
   Renewable Energy Framework Directive                              Biomass EU’). Most of this production,
   needs to maintain and strengthen                                  62.5% in 2009, comes from cogeneration
   the existing legislative frameworks                               plants. A survey conducted by Ecoprog
   for renewable electricity. It needs to                            and Fraunhofer Umsicht reports that the
   establish minimum requirements for                                number of solid biomass power plants
   the removal of administrative barriers,                           has practically doubled over the past
   including streamlined procedures such
   as one-step authorization. Issues, such                           8 European Renewable Energy Council (EREC):
   as priority grid access and a more                                Renewable Energy in Europe – Markets, Trends and
                                                                     Technologies, 2010
                                             Baltic States, and will lead to increases
                                             in production capacities in the coming
                                             years. The major waste wood production
                                             sites (forestry and paper pulp industries)
                                             will be the first to take advantage of the
                                             adjustments to biomass remuneration.9

 Scoring ‘Public Acceptance’

five years. It also asserts that there are
about 800 biomass plants in Europe with

                                                                                             Market Handbook CHP
a combined capacity of some 7.1 GW.
Furthermore, the capacity of these power
plants should rise to 10 GW before the
end of 2013. These figures do not include
fossil fuel based co-combustion power
plants, which are highly popular in the
UK and Germany. The reasons for this
significant growth are the introduction
of an incentive system for biomass
electricity production (feed-in tariff and                                                   29
green certificate) and the introduction
of subsidies that facilitate investments.
The main producer countries are the
major Scandinavian forestry countries,
Germany, and Austria. They have led the
way by subsidising biomass electricity
for over a decade. Political solutions
arrived much more recently in other
countries such as France, the UK and the     9 Eurobserv´ER 2010; Barometre Biomass Solide
                                             – Novembre 2010;
                      3. CoUntry attraCtivEnEss - in dEPth analysEs
                      3.1. aUstria

                      Austrian Biomass Association (ABA)
                      Christoph Rosenberger
                      Franz Josefs-Kai 13
                      A-1010 Wien
                      Tel.: +43-1-533 07 97 25

                        3.1.1. Country Score
                       Country Score Upper Austria - CHP
Market Handbook CHP

                       In the general scoring for sector, Austria - Upper Austria is rated place 62 out of total 81. The
                       underlying categories that influence this result are displayed in the bar chart above.

                        3.1.2. Basic Data                                   borders with Germany and the Czech
                                                                            Republic in the north, the Slovak Republic
   Austria is a democratic republic and                                     and Hungary in the east, Slovenia and
   consists of nine federal states (Graph                                   Italy in the south, and Switzerland and
30 ‘Map of Austria’). The capital and largest                               Liechtenstein in the west.
   city is Vienna. Austria has a land area
   of 83.879 km2 (573 km between the                                        8.4 million Austrian inhabitants were
   western and easternmost points of                                        counted at the beginning of 2011. By
   Austria, the longest north-south stretch                                 2050, the figure should reach ca. 9.4
   totals 294 km) and is, thus, somewhat                                    million, according to the projection. The
   smaller than Portugal and Hungary,                                       municipality with the largest population
   and somewhat larger than the Czech                                       is Vienna, which had 1.7 million residents
   Republic. Located in the southern part                                   at the beginning of 2011. A fifth of
   of Central Europe, the republic shares                                   Austria’s population, thus, lives in the
   Graph ‘Map of Austria’: Austria as a federal state

federal capital, followed by the provincial             3.1.3. Energy Policy
capitals Graz (262.000 residents), Linz
(189.000 residents), Salzburg (148.000             Energy independence – 100% energy
residents), and Innsbruck (120.000                 supply from domestic and renewable
residents).                                        sources – is the objective for Austria

                                                                                                 Market Handbook CHP
                                                   by 2050. RES have a special status in
Austria’s weather is characterized by              Austria. In recent years big efforts were
a transitional climate. Consequently,              made to promote green energy. As a
an oceanic climate with moist westerly             result, 30.8% of the Austrian energy
winds predominates in western Austria,             consumption came from RS in 2010.
whilst further to the east the climate             The measures are divers in nature and
becomes increasingly continental with              comprise initiatives sensitizing the public
decreasing precipitation, hot summers,             on energy issues (e. g. ‘klima:aktiv’) on
and cold winters. The local climate is             the one hand, and support schemes
strongly influenced by the altitude,               in the form of subsidies and beneficial
local topography, and exposure to the                                                             31
                                                   framework conditions on the other hand.
prevailing westerly weather conditions.
                                                   According to the internal burden-sharing
Useful links:                                      of the EU, Austria has to reduce its
• ÖNACE – Austrian classification of eco-          emissions by 13%. In the year 2009,
nomic activities of companies                      GHG emissions in Austria reached 80.1
                                                   million tons. Thus, the emissions of the
• Statistics Austria
                                                   year 2009 were 11.3 million tons above
                                                   the allowable average in the period
                                                   from 2008 to 2012 of the established
                      Kyoto target. Taking into consideration      forestry constitutes the backbone of a
                      the activities of Joint Implementation       viable rural community and also reflects
                      and Clean Development Mechanism,             the cultural tradition of the nation.
                      and the balance from afforestation           Structural economic changes have
                      and deforestation, the deviation from        naturally had an impact on agriculture
                      the target amounts to approximately 5        and forestry: as in most other EU member
                      million tons of CO2-equivalents. Hence,      states, a steady downward trend in the
                      the over-all gap from the years 2008 and     number of operations is accompanied by
                      2009 results in 11.9 million tons CO2-       a simultaneous increase in the average
                      equivalents. To keep the gap as small as     size of the operations. The total output
                      possible the implementation of effective     of agriculture and forestry accounted
                      domestic measures is necessary.              for €8.0 billion in 2010. The Table ‘Land
                      Due to the requirements set by the EU,       Use’ shows the distribution of land use in
                      Austria is bound to                          Austria, subdivided to the federal states.
                                                                   Amongst other function, the agricultural
                      • reduce its greenhouse gas emissions        sector ensures food production, cultural
                      in the sectors covered by the emissions      landscape      preservation,     landscape
                      trading system by at least 21%, and in       management and energy generation.
                      those sectors not covered by the emissi-     The ability to compete within the
                      ons trading system at least 16%,             EU is achieved through sustainable
                      • increase the share of renewable ener-      agriculture, and through an increasing
Market Handbook CHP

                      gy sources of the total energy consump-      specialization of agricultural and forestry
                      tion to 34% – the share in the transport     operations. The coupling of agriculture
                      sector should be at least 10% and            and forestry with the tourist industry,
                                                                   and the increasing cultivation of energy
                      • reduce the energy consumption by
                                                                   crops to promote sustainable raw
                      20% of the prognosticated level of the
                                                                   materials, guarantees the conservation
                      year 2020 through improved energy ef-
                                                                   of economically healthy, productive,
                                                                   farmer-oriented agriculture and forestry
   The Table ‘Bioenergy Consumption                                in a functional rural community.
   Austria’ on the following page shows the
32 development and the expectations of                             In addition to raw materials from forests
                                                                   and timber processing industries,
   bioenergy consumption in Austria from
                                                                   domestic     wastes    and    agricultural
   2005 to 2020.
                                                                   feedstock will gain more importance.
                                                                   These raw materials can be used for the
                        3.1.4. Feedstock                           production of solid biomass, biogas and
                                                                   biofuels. In 2009, about 46,500 ha of
                      The forest cover is particularly high
                                                                   arable land and grassland were used for
                      in Austria: Almost half (47,6%) of the
                                                                   the production of biomass, while energy
                      country, hence 3.99 million ha or 39.926
                                                                   crops on arable land dominated (46,000
                      km2, is covered by forest. Agriculture and
Table ‘Bioenergy Consumption Austria’: Consumption of Bioenergy in Austria – Develop-
ment & Potential from 2005 to 2020

                                                                                                Market Handbook CHP


  Source: Statistics Austria, Energy Balances 1970-2009, Potential Analysis, Austrian Biomass
                             Table ‘Land use’: Percentage of land use1) in Austria 2010 ; 1) Land use per usage type accor-
                             ding to Kataster of the Federal Office for Metrology and Surveying; 2) Built-up areas, gardens,
                             vineyards and other areas

                             Source: Federal institution of Statistics Austria: Facts & Figures – Annual edition 2011

   ha). This corresponds to 3.4% of the                                       miscanthus, an extension up to 3,500 ha
Market Handbook CHP

   total arable land in Austria. Until 2020,                                  has been estimated. This corresponds to
   the cultivation of energy crops as a main                                  an energy increase from 0.14 PJ to 0.9 PJ.
   crop could be extended to 122,000 ha,                                      Currently, agricultural residues are only
   roughly 80% on arable land and 20% on                                      marginally used for energy production.
   grassland. This corresponds to 7.2% of                                     Until 2020 agricultural residues, such as
   the arable land and 1.4% of the grassland.                                 straw, corn cobs or hay from landscape
   In addition, catch crops can be produced                                   maintenance, will gain importance,
   on 23,000 ha and harvesting residues                                       since they do not compete with food and
   can be taken from 150,000 ha. The                                          feed production. Thus, the use of straw
   increased use of biomass wastes and                                        of 15% of the Austrian corn cropland
34 residues from agriculture, such as dung,                                   (about 92,000 ha) could produce 3.8 PJ
   also provide additional energy potential.                                  of primary energy. The energy of corn
                      In 2009 about 1,000 ha of short rotation                cobs from 25% of the corn cropland
                      wood and 800 ha miscanthus were used                    (45,000 acres) is estimated at 0.7 PJ.
                      energetically in Austria. It is estimated               The hay from 1.5% of extensively used
                      that the area of short rotation crops can               grassland (13,000 ha) could produce 0.6
                      be extended to 15,000 ha by 2020. The                   PJ. Overall, energy crops and agricultural
                      energy production could increase from                   residues, in form of solid biomass, could
                      current 0.16 PJ to 3.5 PJ by 2020. For                  produce 9.4 PJ of primary energy by
  3.1.5. Business Case                        tariff of 18 Cent/kWh is needed, which
                                              makes this method currently unfeasible
The growth of the renewable energy            from an economic perspective.
sector is a success story that will develop
further, also in spite of the increasing      The issued tariffs pertain until the
energy consumption. The total turnover        new Green Electricity Act comes into
of investments in renewable energy            effect on the 1st July 2012 (Table ‘FiT
technologies reached €5.229 billion           Austria’). Based on this directive,
in 2010; this was a 5.1% increase to          new    tariffs will   be   determined.
the previous year. The production and
service of renewable energy appliances,         3.1.6. Market Environment
offered employment for 37.649 people
                                              The consumption of bioenergy increased
in 2010 – 5,1% more than in 2009. The
                                              by 30% from 140 PJ in 2005 to 182 PJ in
importance of renewable energies for
                                              2009 (Figure ‘Final Energy Consumption
the national economy is, however, goes
                                              Biomass Austria’). The heating market is
beyond its turnover and employment
                                              the main sales market for biomass with
effects. The ability to generate energy
                                              a share of 79%, followed by the biofuel
from domestic sources reduces the
                                              market with 12.4%, and the green
need of fossil fuel imports making the
                                              electricity market with a share of 8.6%.
national economy less prone to crises.
                                              Assuming that the full resource-potential
In a longer term the economy will gain
                                              will be exploited, the final consumption

                                                                                            Market Handbook CHP
                                              of bioenergy could rise about 31% up to
In general, the Austrian feed-in law          237 PJ. With estimated 76%, the heating
establishes       excellent    framework      market will remain to be the primary
conditions by providing investment            sector using biomass by 2020. A share
security through its tariffs with             of 15% of biofuels and a share of 9%
15(20)-years payment periods, the             of green electricity from biomass and
prioritized grid access, and the purchase     biogas are assumed.
obligation of grid operators.
                                              The production of heat from biomass
The tariffs for solid biomass (wood)          sources increased by about 12% from
remained unchanged. Depending on the          128.5 PJ in 2005 to 143.5 PJ in 2009, while   35
plant capacity, they vary between 14.98       in 2009 about 83% of the produced heat
Cent/kWh for appliances up to 500 kW,         contributed to small scale heating and
and 10 Cent/kWh for appliances over 10        17% arose from district heating (Figure
MW. During the biogas production, heat is     ‘Biomass heat Production’). During this
produced as a by-product. The complete        period, the heat from biomass sources
usage of the arising heat is promoted.        nearly doubled from 12.7 PJ to 24.5 PJ.
This does not apply for the heat from         The heat production from small scale
wood-based electricity production. For        heating increased slightly from 115.8 PJ
the profitability of wood-based plants, a     to 119.1 PJ.
                      Table ‘FiT Austria’: Feed-in tariffs for new green electricity facilities in Austria 2012
Market Handbook CHP

                      Source: Energy-Control Austria, January 2012

   The development potential of heat from                              grids and industrial waste heat from
   biomass sources is estimated to increase                            CHP-appliances. To reach this goal,
36 by 37.3 PJ until 2020 (Table ‘Forecast                              heating appliances with a thermal
   Potential’) and can, hence, reach 181 PJ                            capacity of about 5,050 MW need to
   in total. The most important resource                               be newly installed. Additional 500,000
   for a further expansion is wood with                                households with an estimated heat
   69%, followed by biogas with 15% and                                consumption of 10 kW/household could
   other biomass combustibles with 13%.                                be switched from fossil to biomass
   It is expected, that about 60% of the                               heating. Moreover, old biomass heating
   development potential lies in small                                 appliances need to be replaced. About
   scale heating. The remaining 40% will                               140,000 outdated heating appliances
   be covered by district heating, micro-                              based on wood should be replaced to
    Figure ‘Final Energy Consumption Biomass Austria’: Development of the final energy con-
    sumption of biomass in Austria from 2005 to 2009 and forecast potentials for 2020

    Source: „Heat, Electricity, Fuels – Bioenergy 2020“; Austrian Biomass Association, 2011; http://

reach a higher level of efficiency. With               and 45% on biogas. To utilize the full

                                                                                                       Market Handbook CHP
the fuel amount saved through the                      potential, CHP-appliances operating with
replacement of old appliances, another                 solid biomass and biogas, each producing
45,000 households can be heated.                       100 MW in total, need to be build.
Green energy from liquid and solid
biomass, as well as biogas increased by                   3.1.7. Regulation
approximately 67% from 9,3 PJ in 2005
                                                       In October 2011, the tenth anniversary
to 15,5 PJ in 2009. In this time period,
                                                       of the full liberalisation of the Austrian
green electricity from solid biomass
                                                       electricity market took place. The
including black liquor rose from 7.9 PJ
                                                       liberalisation of the Austrian electricity      37
to 13 PJ, while green electricity from
                                                       market had been a consequence
biogas increased from 1.1 PJ to 2.3 PJ.
                                                       to Austria’s accession to the EU
If the total potential was to be explored,             and the EU’s first energy package.
green electricity generated by solid
                                                       In Austria there are a variety of rules
and fluid biomass, as well as biogas
                                                       and laws for CHP-plants operating on
could increase by about 34% to 20.7
                                                       biomass. Some of the most important
PJ by 2020 (Figure ‘Green Energy
                                                       regulations are declared in the following.
Development). Around 55% of the
potential is based on solid biomass,                   The federal ‘CHP law’ (KWK-Gesetz)
                          Figure ‘Biomass Heat Production’: Development of production of heat from biomass in
                          Austria from 2005 to 2009 and forecast potentials for 2020

                          Source: „Heat, Electricity, Fuels – Bioenergy 2020“; Austrian Biomass Association, 2011; http://
Market Handbook CHP

                       Table ‘Forecast Potential’: Forecast potential for production of heat from biomass in Austria from
                       2009 to 2020.

                        Energy Source                     PJ                                  %
                        Wood based                        25,6                                68,6
                        Black liquor                      1,5                                 4,0
                        Biogas                            5,4                                 14,5
                        Other solid biomass               4,8                                 12,9
                        Sum                               37,3                                100,0

                      governs     the     nationwide    uniform               cogeneration installations for public
                      distribution of funding for the generation              district heating, and on the other hand
                      of green electricity in CHP systems.                    funding is available in the form of
                      On the one hand, funding covers parts                   investment grants for new CHP plants.
                      of the expenses that arise during the                   For air and noise emissions there are
                      operation of existing and modernized                    binding thresholds defined within the
federal ‘emission law for boiler plants               with a capacity of more than 50 kW.
in   Austria’   (Emissionsschutzgesetz                The     ‘Abfallverbrennungsverordnung’
für     Kesselanlagen     –      EG-K).               (AVV) regulates combustion techniques,
There are numerous regulations in                     emission limits, and operation conditions.
Austria that affect the operation of                  The           ‘Immissionsschutzgesetz-
heating systems based on biomass. The                 Luft’ (IG-L) comprises limits and
most important ones are listed below.                 targets   for    several    pollutants.
The EG-K and the ‘Luftreinhalte-                      The         target         of          the
VO für Kesselanlagen’ (LRV-K) are                     ‘Emissionshöchstmengengesetzes Luft’
regulating the approval, the operation,               (EG-L) is the regulation of air pollutants
the air emissions, and the monitoring                 (NOx, SO2, NMVOC and NH3) through the
of   steam    and    gas    generators.               determination of national emission limits.
The       ‘Feuerungsanlagenverordnung’                The federal law ‘Green Electricity
(FAV) applies to subjects under approval              Law Austria 2012’ (Ökostromgesetz
and    already    approved    appliances              2012) regulates the financial support
   Figure ‘Green Energy Development’: Development of green energy from liquid and solid bio-
   mass and biogas in Austria from 2005 to 2009 and forecast potentials for 2020

                                                                                                          Market Handbook CHP


   Source: „Heat, Electricity, Fuels – Bioenergy 2020“; Austrian Biomass Association, 2011; http://www. Source: „Heat, Electricity, Fuels – Bioenergy
   2020“; Austrian Biomass Association, 2011;
                      of the feed-in tariffs, the grid access,    work conditions: In the interests of long-
                      the acknowledgement of plants, the          term development, stable framework
                      obligations for applicants and plant        conditions should be created.
                      operators,     investment      subsidies,   • Decentralization of plants: The power
                      etc. Since the year 2003 the ‘Green         generation from solid biomass should
                      Electricity  Law     Austria’  regulates    focus on the decentralisation of plants.
                      homogeneous subsidies and support
                      schemes for the whole of Austria.           Hence, the establishment of plants
                                                                  with a capacity of less than 500 kW
   The Green Electricity Act in Austria                           are recommended because efficient
   provides the main framework for                                regional supply concepts are more
   electricity generation from biomass and                        feasible than nationwide mega-projects.
   biogas. By the end of 2009, electricity                        Domestic     companies     are    working
   generation systems based on solid                              intensively to develop new technologies
   biomass with a capacity of 313.4 MW,                           for low capacity-systems. Only if these
   biogas plants with a capacity of 77 MW,                        companies succeed in establishing
   systems based on liquid biomass with a                         their products on the domestic market,
   capacity of 9.6 MW, and plants working                         they will be able to benefit from
   with landfill- and sewage gas with a                           export opportunities that appear to
   capacity of 21.2 MW had been established                       be enormous. Especially small-scale
   in Austria. These plants generated 2,566                       facilities in existing biomass heating
   GWh in total. The electricity, subsidised                      plants and industrial plants offer a great
Market Handbook CHP

   by the Renewable Energy Act, was fed                           potential to switch from mere heat
   into the grid. Additionally, 1,100 GWh of                      generation to combined heat and power.
   electricity from black liquor and 600 GWh                      For the green electricity generation
   from sewage sludge, carcass meal and                           from solid biomass new sources, like
   other renewable waste were generated                           short-rotation wood, corn cobs and
   without subsidisation. In total, 4,300 GWh                     other agricultural residues should be
   electricity were generated from biomass                        used to complement the raw material
   sources. It is assumed that both, the                          range. With regards to the production of
   electricity generation from solid biomass                      feedstock for biogas plants, it is crucial
40 and from biogas can be extended by 100                         to avoid competition over land for food
   MW, if the Green Electricity Act creates                       and feed production – food production
   appropriate boundary conditions that                           should always have the highest priority.
   allow an economic system operation.
   With these systems additional 1,300 GWh                        If designed and planned well, food
   of green electricity could be generated.                       and bioenergy production can coexist.
                                                                  Hence, intelligent designs are needed to
                      The most important measures for             manage the food and feed production.
                      further expansion of green power are:       A considerable potential for a further
                      • Longer-term predictability of frame-      expansion of biogas usage arises
from higher yields through the use of         on the fifth place in Europe after
fertilizers as well as the use of grassland   Luxembourg, Norway, Sweden and
biomass and catch crops. Small systems        Switzerland. According to the Corruption
based on the previously named raw             Perception Index , that measures the
materials, should be considered in the        level of transparency, Austria is on
Green Electricity Act. This management        the 16th position of the whole world.
measure would also lead to decreasing         Austria achieved the 32nd place of 183
carbon emissions in the rural areas. Gas      countries on the IFC ranking on the
produced in larger biogas plants should       ‘Ease of doing business’. Austria’s rank of
be injected into the gas grid or used         ‘Starting a Business’, however, is relatively
to generate fuels. In the future, the         low due to the very high administrative
cascading use of resources is important.      and        regulative       requirements.
Accruing residual products should be
used in biogas plants to generate energy.     As Austria is member of the Eurozone,
                                              currency exchange risk within this
Useful Links:                                 zone, that is to say for investors coming
• Green electricity law Austria 2012          from other member countries of the
(Ökostromgesetz 2012)                         Eurozone, is low. With an average
• E-Control Austria                           inflation rate of 1.8% for the period
                                              from 2005 to 2010, it is one of the
• OeMAG – Abwicklungsstelle für Öko-          lowest within Europe. The European
strom AG (processing and administrati-        average for the same period is 2.3%.

                                                                                              Market Handbook CHP
on centre for green electricity in Ausria)
                                              The easiness of getting a credit by
• CHP-law Austria (KWK-Gesetz Austria)        banks is very much dependent on
• Emissionsschutzgesetz für Kesselan-         individual project designs as the bank
lagen - EG-K (emission law for boiler         will assess reliability of the chosen
plants)                                       technology, feedstock supply security
                                              and price risks. The development of
• Luftreinhalte-VO    für   Kesselanlagen
                                              appropriate measures or strategies for
                                              the use of bioenergy is very specific.
                                              The optimal solution for the specific           41
  3.1.8. Project Financing                    situation must consider ecological,
                                              economic, as well as social aspects.
According to outcomes from recognized
rating agencies like Standard & Poor´s        Project        financing        institution:
and Moody´s , Austrian markets can be         RENERGIE offers support with regards
considered as safe from the country           to the financing and operation of energy
risk perspective. The reliability and         generating facilities using renewable
credit worthiness of the Austrian             sources,     develops    projects     for
economy is rated with best scores.            renewable power and heat, and realizes
COFACE country risk rating sees Austria       the appropriate production plants. The
                      projects are implemented by equity
                      investments in selected European markets.

                        3.1.8. Readiness for Uptake
                      The readiness for uptake seems to be
                      good. New projects need to be planned
                      and implemented in a considerate and
                      well adapted way under the participation
                      of local inhabitants and stakeholders.
Market Handbook CHP

                        3.2.2. Basic Data
42 Germany, officially the Federal Republic
3.2. GErmany

German Bioenergy Association (BBE)
Thomas Siegmund
Godesberger Allee 142-148
D-53175 Bonn
Tel.: +49-228 81 002-22

  3.2.1. Country Score
  Country Score Germany Bavaria - CHP (November 2011)

                                                                                                    Market Handbook CHP
  In the general scoring for sector, Germany - Bavaria is rated place 14 out of total 81. The un-
  derlying categories that influence this result are displayed in the bar chart above.

of Germany, is a federal parliamentary             heather, marshland, gardens).
republic in Europe. The country consists           Considering a total population of
of sixteen federal states (see Figure ‘Map         81 million, and an average of 229
Germany’). The capital and largest city            inhabitants/km² the population density
is Berlin. Germany is, with 357,104 km²            is considered to be high enough to               43
land area, one of the largest countries in         provide sufficient sales potentials even
Europe, located in a temperate climate             on regional scale; although there are
zone with average temperatures of                  geographical differences in real terms,
-0,5 degree Celsius in January and 17              with lower densities in the eastern and
degree Celsius in July. The forest area in         northern parts compared to the western
Germany amounts to 107.000 km2 (nearly             and southern regions of Germany.
30% of the whole land area). 188.000
km2 (52% of the land area) of the area             Useful links:
is agricultural land (grassland, parkland,         Facts and Figures:
                      • Johann-Heinrich-von-Thünen-Institut      expansion of the use of solid biomass in
                      • Federal Ministry for Food, Agriculture   the energy sector of 17,5 TWh . So there
                      and Consumer Protection                    still is a production gap which will have
                                                                 to be filled during the coming decade.
                      • Federal Statistical Office
                                                                 The political will to develop the CHP-
                      • EUROSTAT                                 sector can be seen as quite favorable,
                      • German Renewable Energies Agency         as the benefits of biomass are well
                      Information Platform, www.unendlich-       recognized and biomass is seen as a key
             and www.foederal-er-       technology to increase the market share
                                            of RES in general. As biomass can provide
                                                                 both base and peak load electricity, it
                        3.2.3. Energy Policy                     can furthermore balance fluctuating
                                                                 RES energies, such as wind power and
   The German government aims at                                 photovoltaic. The proposed measures to
   reaching a share of RES on final energy                       reach these targets, as described in the
   consumption of approximately 20%                              nREAP and experienced in practice, are
   in 2020, thereof 35% in the electricity                       considered to range from ‘very good’ to
   sector. This number is supposed to rise                       ‘sufficient’; however, there is still room
   to 80% in 2050. Due to the storability                        for improvements.
   of feedstock and the flexibility of energy                    With the feed-in law in Germany, called
   supply, bioenergy will play a key role                        ’Renewable Energies Act’ (EEG), the
Market Handbook CHP

   in this strategy. In 2010, electricity                        government introduced an excellent
   generation with solid biomass had a                           support scheme with fixed feed-in tariffs
   share of 11,9% of total RES-E production                      for different feedstock and capacities,
   (102 TWh). The most important support                         long-term     payment     periods    and
   scheme is the Renewable-Energy- Act                           guaranteed grid access, and regulated
   (EEG) which supports the installation of                      grid connection rules. The feed-in law is
   CHP-plants fired with biomass. Amongst                        amended in regular periods to adjust the
   the different bioenergy technologies,                         tariffs to actual market developments
   the amount of electricity produced by                         and needs. This Act serves to implement
44 German CHP-plants from solid biomass                          Directive 2001/77/EC of the European
   in 2009 was 12 TWh (TWel) with more                           Parliament and of the Council of the
   than 7.5 million tons of wood (atro).                         27th September 2001 on the promotion
   The EEG, which provides feed-in tariffs                       of electricity produced from RES in
   according to the capacity installed                           the international electricity market. In
   and feedstock used, is a key driver of                        terms of achieving expansion targets
   a steady market growth. Since 2012,                           for renewable energies in the electricity
   however, the utilization of waste wood                        sector, the Renewable Energy Sources Act
   is not supported any longer. Within the                       is the most effective funding instrument
   nREAP there is a target value for the                         at the German government’s disposal.
Also international observers consider it         offer unilateral legal advice or project
an exemplary act. The amendment of the           consulting.
EEG in 2011 introduced additional options        Useful links:
to invest into biogas storage facilities
and to integrate biogas into the energy          Laws and Ordinances:
market. For the CHP-production with              • National Renewable Energy Action Plan
solid biomass there are new possibilities,
                                                 • BMU - nationaler Aktionsplan
too. With the amended EEG there is an
obligation of a 60% heat usage in every          • Brochure - Biomasseaktionsplan
plant to increase the efficiency factor.         • Transparency Platform - Action Plan
The usage of used wood in newly built
CHP-plants (from the 1st of January              • EEG Clearing House
2012) is not promoted any more.1                 Renewable-Energy-Heat-Law:
Due to the rising success of the bioenergy       • BMU - Erneuerbare Energien
sector in the electricity market, different
                                                 • Gesetze im Internet
concepts and strategies were introduced
in the new EEG.         At policy-making-        Market Incentive program for Renewable
level, this led to different viewpoints          Energies
concerning which strategy was best               • Bafa - Energy Index
to follow. Eventually, this resulted in
constant public discussions on changing          • Bafa - Biomass Index

                                                                                             Market Handbook CHP
tariffs and regulations – and therewith          • KfW Index
to rising uncertainty and decreasing
confidence in the stability of policy
frameworks on the investor-side.                 • Renewable-Energy-Heat-Tax
The Federal Ministry for the Environment,        • Federal Office of Economics and Ex-
Nature Conservation and Nuclear Safety           port Control (BAFA)
(BMU) has established a clearing house           • Pellets F&E and Marketing => Federal
under the EEG, which has started its             Agency for Renewable Ressources
operations in October 2007. The clearing
house settles disputes and tackles               • German    Biomass     Research   Center   45
application issues arising under the             (DBFZ)
EEG. Its services are free of charge for         Associations:
all stakeholders who have obligations or
                                                 • German Renewable Energy Federation
rights under the EEG. In the case of a
dispute, the clearing house will act and
try to provide solutions or arbitrations if      • German Bioenergy Association (BBE)
all stakeholders wish for that. It does not      • Association for CHP Germany
1 Amendment of the Renewable-Energy-Sources-
Act (EEG) in 2011:
                        3.2.4. Feedstock                                  and forests in total terms are Bavaria
                                                                          (m3.5 ha), Lower Saxony (m2.9 ha),
                      In Germany, 2,300 m² of farm land                   North Rhine-Westphalia (m1.7 ha),
                      (including grassland), and 1,460 m² of              Brandenburg (m1.5 ha) and Mecklenburg-
                      arable farm land (without grassland) per            Western Pomerania (m1.5 ha).
                      capita are available. 107.000km2 of forest
                      area contain a wood reservoir of more               Germany has a large stock of wood at
                      than 3,5 billion m³2 and a yearly growth            hand. From its 3.4 billion m³ of wood
                      of 120 million m³ of new biomass. There             emerges a growth of about 120 million
                      is great potential for wooden biomass in            m³ every year, including bark. Only 50%
                      Germany. The usage of wood per year                 is used for energetic purposes, whilst
                      in Germany amounts to approximately                 more than 80 million m³ wood is used
                      120m33 (including material use of wood              for material purposes.
                      in saw mills). In addition, about 40                Although the demand for wood chips
                      million private households, a strong                has increased in the last years, German
                      biomass processing industry, energy                 forests are not close to overexploitation.
                      crops cultivation and bio-wastes offer a            Moreover, the supply with wood chips
                      considerable potential for biomass based            suffices for a stable supply of CHP-
                      CHP energy production in Germany.                   plants for a couple of years, even if the
   In Germany 56% of the forest area is                                   number of plants increases. Even so, raw
   owned by public bodies, whilst 44% is in                               material suppliers are already exploring
                                                                          alternatives, especially from Short
Market Handbook CHP

   private hands. More than 50 million m3
   wood4 is used annually for electricity and                             Rotation Coppice (SRC) with cottonwood
   heating purposes.5 Out of all renewables                               or willow. In 2011 the whole cultivated
   used for electricity, bioenergy contributes                            area for energy wood added up to 6000
   more than 16.3 billion kWh (solid biomass                              hectares. The total potential for SRC is
   and biologic part of waste), which                                     calculated to 500.000 ha7 (See Figure
   corresponds to nearly 3%6 of the entire                                ‘Increase German Wood’).
   German electricity supply. In 2011, more                               For 2020 the German Biomass Research
   than 265 CHP plants were installed. The                                Center (DBFZ) prognosticates a supply
   installed capacity increased up to 1.210                               gap for wood (See Figure ‘Supply Gap’)
46 MWel (beginning of 2010).                                              in the German economy. The biggest
                      Regions with the highest number of                  consumer groups of wood in 2020 will
                      farm land (grassland and arable land)               be the material use (nearly 50%), split
                                                                          log heating systems (etc. 10%), and
                                                                          CHP-plants with more than 12%. Other
                      2 Inventurstudie 2008:
                      3 Data source:
                                                                          consumer groups are pellet heating
                      4 German Wood Fuel and Pellet Association: www.     systems, district heating systems, and
                                                         fuels for transport (Please see the left
                      5 Ministry of Food, Agriculture and Consumer Pro-
                      tection (BMELV):                       7 Federal Ministry for Food, Agriculture and Consu-
                      6                       mer Protection:
bar in Figure ‘Supply Gap’). To cover    (DBFZ)
this demand there are different wood     • Agricultural Market Information Com-
types which will be available in 2020:   pany (AMI)
The biggest source will be forest wood
(50%), saw mill residues (10%), used     • Federal Ministry for Food, Agriculture
wood (less than 10%), landscaping        and Consumer Protection (BMELV)
residues, SRCs, and other minor
important sources.                         3.2.5. Business Case
Useful links:                            Although prices for fossil energy
Facts and figures:                       carriers in the heat, transportation and
                                         electricity market hav risen steadily over
• Federal Agency for Renewable Res-
                                         the last decade, the break-even point of
sources (FNR)
                                         bioenergy has not yet been reached,
• German Biomass Research Center         because production costs of bioenergy
                                         have also been increasing due to rising
   Figure ‘Increase German Wood          feedstock prices. Even the energy
                                         production with wood chips increases
                                         slowly (See Figure ‘Price Development’).
                                         In the beginning of 2012, it cost 3 cent
                                         to produce one kilowatt-hour (kWh) of
                                         energy with wood chips. This is still

                                                                                      Market Handbook CHP
                                         half of the costs for one kilowatt-hour
                                         produced with natural gas or oil.
                                         Also prices for fossil fuels, which are
                                         mainly being imported, took a jump in
                                         prices, especially since 2003. Compared
                                         with the reference year 1991 (index =
                                         100) the price index for crude oil imports
                                         rose to 376 points in 2008, resulting in
                                         a 276% growth for this period. Between
                                         January 2009 and April 2010 prices
                                         advanced strongly by 90%. The price
                                         development for coal is comparable with
                                         an increase from 100 points in 1991
                                         to 248 points in 2008, although this
                                         development was marked with fewer
                                         fluctuations. The main driver for the
                                         price increase is the rise in coal demand
   Source:                   in the BRIC countries and the US. The
                                         higher fuel procurement costs are also
                            Figure ‚Supply Gap‘: Demand for wood as material and energy provider in 2020 in
Market Handbook CHP


                      reflected in increased electricity prices        southern and northern Germany (See
                      for households, which rose from €40.67           Figure ‘Average Price’).
                      per month for a reference household              Investments into CHP-plants fired with
                      (3.500 kWh/a) in 2000 to €67.7 per               solid biomass are supported with public
                      month in 2009. The highest share of              budgets. The most important support
                      the increase in electricity prices goes          scheme is the EEG, which supports
48                    to the generation, transportation and            the installation of CHP-plants fired with
                      sales with 61%, while increased costs of         solid biomass. The fixed, long-term,
                      RES via EEG, allocated to all electricity        guaranteed feed-in tariffs for power
                      consumers, have a share of 11%.8                 produced using renewable energies
                      The average price for wood chips in              that were legally established in the EEG
                      Germany in 2012 lies between €130 – 140          have provided for enormous growth in
                      for one ton. The prices diverge between          the German market for decentralized
                                                                       electricity generation from solid biomass
                      8 Federal Environment Agency,
                                                                       (see Figure ‘Development CHP’).
    Figure ‘Price Development’: Price development for energy in cent per kWh


                                                                                              Market Handbook CHP
In June 2011 an amended version of              systems are statutorily entitled against
the EEG was published by the German             the grid operator to payments for
Government. In terms of achieving               electricity exported to the grid. The EEG
expansion     targets   for   renewable         has also introduced the so-called market
energies in the electricity sector, the         premium and the flexibility premium
EEG is the most effective funding               for system operators who directly sell
instrument at the German government’s           their electricity from RS. In general, all
disposal. International observers see it        technologies used to generate electricity
as exemplary.                                   from RS are eligible for feed-in tariffs (§   49
The new EEG maintains the basic                 16 par. 1 EEG). Eligibility also applies to
structure. However, in detail far reaching      electricity that was temporarily stored
improvements with the purpose of                prior to being exported to the grid.
further increasing the share of renewable       Eligible under the following conditions
energies in electricity generation by           concerning CHP plants with solid biomass
2020 have been introduced according to          (§ 27 EEG):
the cabinet decision (2010) concerning          • Definition of biomass. The substances
the energy transition. According to this        regarded as biomass are specified in a
Act, operators of renewable energy
                          Figure ‘Average Price’: Average prices per ton wood chips in northern and southern Germany
                          between 2009 – 2012

Market Handbook CHP

                      separate ordinance (BiomasseV).9                 that no other substances are being used.
   • Obligation to employ CHP technology.                              Where a generator fails to meet this re-
   Electricity is eligible for the full tariff as                      quirement, his tariff level will be reduced
   specified in the EEG only if a certain per-                         to the market price.
   centage of the electricity (usually 60%)                            • Liquid biomass is ineligible for the ta-
   was generated from CHP. Where a gene-                               riff. In general, electricity is ineligible
   rator fails to meet this requirement, his                           for the feed-in tariff if generated by new
   tariff level will be reduced to the market                          plants using liquid biomass. If generated
50 price.                                                              by new plants, this type of electricity is
                      • Obligation to keep a record of substan-        eligible only, if the biomass is required
                      ces. Electricity will be eligible for the full   as start-up, priming and supporting fuel
                      tariff as specified in the EEG only if the       (e.g. in dual-fuel CHP units).
                      system operator can prove which type             The current version of the EEG sets
                      of biomass is being used by presenting a         out the tariffs for 2012. The BMU has
                      copy of a record of the substances used.         published an overview of the tariff levels
                      He furthermore has to provide evidence           and degression rates (The degression
                                                                       rate is 2% for solid biomass) as set out
                      9                    in the EEG. The overview in Figure ‘Tariff
    Figure ‘Development CHP’: Development of CHP-plants in Germany linked to the develop-
    ment of the EEG

    Source: DBFZ

Level’ shows an example on how these           years plus the year in which the system

                                                                                            Market Handbook CHP
tariffs are calculated for a plant fired       or plant was put into operation (§ 21
with solid biomass (just wood chips from       EEG). The payment of the basic feed-in
SRC in raw material promotion tariff 1):       tariff related to the nominal power output
The promotion demand for the exemplary         is combined with an annual degression
plant is 17.25 €ct/kWh. Basically the          of this feed-in-tariff of 2%. The costs of
feed-in tariff for CHP-plants fired with       the feed-in tariff scheme are borne by
solid biomass counts the nominal power         the final consumers.
output (Leistungsanteil). For this output      Useful links:
the operator gets a basic support of 6 –       Facts and figures:
14.3 €ct/kWh (according to the system                                                        51
size). Additionally a bonus is paid for the    • FNR, Federal Agency for Renewab-
use of special substances:                     le Ressources, /
• €ct 6 – 14.3 per kWh (according to
system size) plus (if applicable)              • Federal Ministry of Economics and
• bonus of €ct 2.5 – 8 per kWh for use
of special substances (§ 27 par. 1, 2 EEG      • BMELV, Federal Ministry for Environ-
in conjunction with BiomasseV)                 ment, Nature Conservation and Consu-
                                               mer Protection: / www.
The tariff payment period is usually 20
                   / www.erneuerbare-ener-            amounted to approximately 1,250 MWel
                                                            (see Figure ‘Installed CHP plants’).
                      • DBFZ, German Biomass                Research        Plants fed an estimated 8,400 GWh of
                      Center:                                   electricity into the public grid in 2010,
                                                                            remunerated as specified in the EEG.
                      • KfW, KfW-Bankengruppe:                   The trend favours medium sized plants.
                                                                            The spatial distribution of solid biomass
                        3.2.6.       Market environment                     CHP-plants in Germany is strongly
                      Worldwide, the use of solid biomass                   linked to locations with high population
                      is of key importance with regards to                  and construction centers (used wood),
                      energy supply. Solid biomass is still by              but also to the forest areas in the South
                      far the most utilized form of renewable               and East of Germany (wood residues of
                      energy in Germany. At the end of 2010,                forestry and wood processing industry).
                      an estimated number of 264 CHP plants                 As it is obvious in Figure ‘Distribution’
                      with electrical outputs from 0.12 MWel                and Figure ‘Raw Materials’ used
                      to 100 MWel were producing power and                  wood dominates solid biomass power
                      heat in Germany. Total installed capacity             generation.

                          Figure ‘Tariff Level’: Tariff level as set out in the EEG for a plant fired just with solid bio-
                          mass (wood from short rotation copices with an installed capacity of 1200 kW and 7230
                          hours of plant operation in one year
                           Leistungsanteil                           Vergütete            Grundvergütung
Market Handbook CHP

                                                                     Arbeit* [kWh]
                                                                                          absolut [E]     anteilig [ct/
                           bis 150kW     14,3                        1,317,600            188,417         2.15
                           von 150kW bis 12.3                        3,074,400            378,151         4.31
                           von 500kW bis 11.0                        2,196,000            241,560         2.75
                           500kW     bis 11.0                        2,196,000            241,560         2.75
                           Summe                                     8,784,000            1,049,688       11.95

                           *2012 ist ein Schaltjahr mit 8784 Stunden
52                         A   n     t    e   i   l                       vergütete      Arbeit
                                                                                                  a b s o l u t anteilig
                                                                                                  [€]           [ct/
                           bis 500kW                  6.0                 4,392,000               263,520 3.00
                           bis 750 kW                 5.0                 2,196,000               109,800 1.25
                           bis 5.000kW                4.0                 2,196,000               87,840        1.00
                           Summe                                          8,784,000               461,160 5.25

                          Source :
In Germany there is a broad consensus in         The main organizational challenge will be
society advocating the end of the usage          the transformation of the energy (power)
of nuclear power by 2022. There will             market. Consequently new instruments
be an accelerated development of RES             for ‘market and system integration’ have
and also a significant increase in energy        been in the focus of the EEG revision.
efficiency in the German market. The             Bioenergy represents one third of the
major part of the RES power plants will          RES power generation in Germany. Solid
be wind and solar, which are depending           biomass represents one third of the
on weather and daytime. Hence, base-             bioenergy power generation in Germany.
load is not longer needed, but flexibility of    Market growth of solid biomass slowed
conventional as well as non intermittent         down significantly and fell short of
RES power plants will get more and               biogas due to political conditions and
more important. To produce energy on             fuel shortages for bigger plants. Even
demand will be a paradigm change for             if combustion technologies with steam
bioenergy: quality instead of quantity.          turbines are still dominating the power
Technical challenges for solid biomass           generation, ORC turbines became more
CHP-plants hereby are:                           important in the last five years (see
• Plant lay-out                                  Figure ‘CHP technologies’). Gasifiers are
• Raw material supply                            still under development.

• Storage technologies                           Whilst the relative share of bioenergy in

                                                                                             Market Handbook CHP
             Figure ‚Installed CHP plants‘: Number of installed CHP-plants in Germany
             fired with solid biomass in different size groups


                      Figure ‘Distribution’: Spatial distribution
                      of biomass CHP-Plants in Germany with
                      different raw material supply
Market Handbook CHP


                               Figure ‘Raw Materials’: Raw
                               material use in solid Biomass
                               plants in Germany in 2010


the overall energy supply will decrease,           3.2.7. Regulation
its importance will rise since it will
be crucial to balance the fluctuating           The financial support of the feed-in
production of wind and solar.                   law for solid biomass used in CHP is
                                                complemented with regulations for
Useful links:                                   emissions. For the electricity grid, rules
• FNR, Federal Agency for Renewab-              are defined within the feed-in law itself.
le Ressources, /            In these regulations, grid operators are                                      obliged to feed RES-electricity into their
                                                grid, to extend their grid if required, and
• BMELV, Federal Ministry for Environ-
                                                to transmit RES electricity with priority
ment, Nature Conservation and Consu-
                                                through the grid.
mer Protection: / www. / www.erneuerbare-ener-            In their monitoring report of the EEG, the                                          DBFZ advices the German government to
                                                guarantee the sustainability of wooden
• DBFZ, German Biomass             Research
                                                raw materials, since sooner or later the
                                                need to proof the sustainability of solid
                                                biomass in Germany will emerge. Until
                                                now there is no sustainability certification

                                                                                               Market Handbook CHP
             Figure ‚CHP technologies‘: Differently used CHP-plant technologies in
             Germany until 2010


                      for wood chips. As soon as the EU will      If no approval according to 4th BImSchV
                      regulate this topic by publishing a new     or 1st BImSchV is required, rules of the
                      directive for the sustainability of solid   Technical Instructions on Air Quality
                      biomass there will also be an ordinance     Control (TA Luft) apply, stating that
                      within the German legislation.              total immissions to housings must not
                      The approval of solid biomass plants        exceed given thresholds. Hence, a
                      by authorities is not seen as a barrier;    solid biomass plant does not need to
                      but of course approval periods can vary     reduce emissions, if the total impact for
                      from authority to authority, depending      surrounding households does not exceed
                      on their work load, skilled personnel or    the thresholds.
                      local conditions. For approval, several     Concerning noise emissions there are
                      emission thresholds have to be fulfilled,   binding thresholds defined within the
                      such as emissions into the air, odor        BImSchG. For biogas plants, which do
                      emissions, and noise.                       not require an approval according to the
   Requirements to reduce emissions                               4th BImSchV, the same thresholds can
   into the air depend on whether the                             be applied by authorities. Thresholds
   solid biomass plant needs an approval                          vary in relation to land category (see
   according to the 4th Ordinance for the                         Table ‘Noise Emission Thresholds’).
   Implementation of the Federal Immission                        The industrial emissions directive IED
   Control Act (4th BImSchV) or not. If                           (2010/75/EU) will replace various other
   this is the case, the solid biomass plant                      guidelines in Germany concerning the
Market Handbook CHP

   has to actively undertake measures to                          rules regarding waste burning (2000/75/
   guarantee that the emissions into the air                      EG) or the guideline with regards to
   do not exceed given thresholds, which                          large combustion plants (2001/80/EG).
   are CO 1 g/m³, NOx 0.5 g/m³, dust 0.2                          The IED pursues the target to reduce
   g/m³, SO2 0.3 g/m³ and 0.6 g/m³ for                            environmental pollution caused by
   Formaldehyde. The 4th BImSchV is just                          industry plants. In this new directive,
   valid for plants bigger than 1 megawatt.                       which should be implemented in national
   Plants with a nominal power output                             law until the beginning of 2013, different
   below 1 megawatt are considered under                          regulations      concerning      emission
56 the 1st BImSchV . CHP-plants, which                            reduction for large scale plants (>50
   are fired with used wood (category III                         MW with used wood) will be integrated.
   or IV), additionally have to follow the                        The branch expects a huge influence of
   17th BImSchV of the Federal Ministry                           IED on the planning and building of solid
   for Environment, Nature Protection and                         biomass CHP-plants.
   Nuclear Safety, because this ordinance                         Useful links:
   regulates the utilization of contaminated
   used wood (with varnish, stain, etc.).10                       Facts and figures:
                                                                  • Federal Ministry for the Environment,
                      10                               Nature Conservation and Nuclear Safety
 Table ‘Noise Emission Thresholds’: Noise emission thresholds in different areas

    Source: Presentation Doris Einfeldt

(BMU)                                              projects offer a participation in sustainable
• Federal Ministry for Food, Agriculture           energy supply with renewable energies.
and Consumer Protection (BMELV) :                  Investments into CHP-plants fired with                                       solid biomass are supported by public
• Laws in the internet: www.gesetze-im-            budgets. The most important support                                        scheme is the EEG, which supports the
                                                   installation of CHP-plants fired with solid
• UBA, Umweltbundesamt:                 biomass. In addition, the Federal Agency
• BAV, Bundesverband Altholzaufberei-              for Renewable Resources (FNR) supports
ter und –verwerter: www.altholzver-                R&D-activities.                                            The market perspectives, political
                                                   framework conditions and economic

                                                                                                   Market Handbook CHP
  3.2.8. Project Financing                         parameters are usually well-known to
                                                   decision makers. A special focus when
Germany is seen to be a ‘save’ country             deciding about credits and loans is put
for foreign investments. Its ratings of            on the reliable, sustainable and long-
well-known organizations like Standard             term feedstock supply as well as a sound
and Poor’s show best notes with triple             concept for the sales of the product.
A in 2011. Also COFACE index attests
German markets a low country risk                  With more than 250 plants the German
concerning payment failures; the same              market of solid biomass plants is not yet
is true for the market transparency                saturated. In general, public subsidies
which is seen to be very good as                   can be claimed in addition to EEG-              57
measured by the Corruption Perception              support at KfW-Bank in terms of low
Index. However, easiness of starting a             interest loans for credits with a long
business in Germany is assessed by IFC             payback period. Several private equity
World as merely moderate due to the                funds are doing business in the German
sophisticated regulatory environment.              bioenergy market, too, looking for
                                                   attractive investment opportunities.
Banks are familiar with financing
bioenergy projects with view on solid              Facts and figures:
biomass plants and biomass projects.               • Standard & Poor’s
Different investment fonds for biomass
                      • Moody’s                                   in the best suitable way, while being able
                      • COFACE                                    to speak with one voice when it comes
                                                                  to overall policies. The BBE is part of the
                      • Corruption Perception Index               Federal Renewable Energy Association
                      • IFC Doing Business                        (BEE) who represents the interests of
                                                                  all renewable energy associations in
                      • Federal Ministry for Food, Agriculture
                      and Consumer Protection (BMELV)
                                                                  The accelerated development of RES
                      • KfW-Bank
                                                                  in Germany is, with more than 95%,
                      • Federal Agency for Renewable Resour-      accepted by a huge majority. Even when
                      ces (FNR)                                   the direct neighborhood is concerned 60-
                      • German Association of energy agen-        70% remain in favour of RES. Renewable
                      cies                                        energies in general are warmly welcomed
                                                                  in German society. Especially wood
                      • Greenvalue                                chips are beheld in a very positive way.
                                                                  Technical concerns, like dust emissions
                        3.2.9. Readiness for Uptake               have been mitigated. The biggest
                                                                  concern remains to be the raw material
                      The readiness for uptake is considered      supply for the production of wood chips
                      to be good, though new projects             in large-scale plants. Basically there is
                      need to be planned and implemented          enough raw material available, but there
Market Handbook CHP

                      deliberately under participation of local   are also other stakeholders (like material
                      inhabitants and stakeholders. With more     utilization of used wood, residential wood,
                      than 250 solid biomass CHP-plants all       etc.) who want access to established
                      over Germany in 2011 the technology         wood potentials. Therefore, there is a
                      is known to the public, although only a     competitive pressure on raw material
                      minor group of stakeholders is familiar     and on prices.
                      with the detailed functioning, regional
                      impacts and benefits of CHP-plants.         A big challenge for the acceptance of
                                                                  solid biomass plants would arise, if there
   The bioenergy market is excellently                            was more co-firing with industrial pellets
58 organized in Germany, as for each                              in coal-fired CHP-plants, like it is already
   market sector there exists at least                            done in England or Denmark. In this
   one specialized association, organized                         case the concern, assuming that there is
   under the roof of the German Bioenergy                         a sufficient amount of raw materials for
   Association (Bundesverband BioEnergie                          the wood chip production available, also
   BBE). This allows to clearly deal with                         the good name of solid biomass plants in
   technology related issues and to                               Germany would be impaired.
   represent to the diverse interests of
   the different stakeholders (raw material                       In addition to concerns with regards
   suppliers, traders, manufacturers, etc.)                       to difficulties of supply, consumers
have been getting anxious about
the sustainability and environmental
benefits of biomass due to manifold and
aggressive, partly dubious campaigns of
environmental and clerical NGOs.
Useful links:
• German Bioenergy Association (BBE),
• German Farmers Union (DBV)
• German Reneable Energy Federation
• Bundesverband     Kraft-Wärme-Kopp-
• Federal Ministry for the Environment,
Nature Conservation and Nuclear Safety
• Federal Ministry of Food, Agriculture

                                          Market Handbook CHP
and Consumer Protection (BMELV)

                      3.3. italy

                      Associazione      Italiana             Energie
                      Agroforestali (AIEL)
                      Annalisa Paniz
                      Viale dell’Universita 14
                      I-35020 Legarno
                      Tel.: +49-88 30 772

                        3.3.1-Country Score
                       Country Score Central Italy - CHP (November 2011)
Market Handbook CHP

                       In the general scoring for sector, Italy - Central is rated place 6 out of total 81. The underlying
                       categories that influence this result are displayed in the bar chart above.

                        3.3.2. Basic data                                  60.6 million inhabitants, Italy is the fifth
                                                                           most populous country in Europe, and
   Italy, officially the Italian Republic, is a                            the 23rd most populous country in the
60 unitary parliamentary republic in south-                                world. The population density, which
   central Europe. In the north, Italy borders                             amounts to 201 people/km² (520/
   with France, Switzerland, Austria, and                                  sq. mile), is higher than that of most
   Slovenia along the Alps. Southern Italy                                 Western European countries. However,
   is made up of the Italian Peninsula,                                    the distribution of the population is
   Sicily, Sardinia –the two largest islands                               rather heterogeneous. Whereas areas,
   in the Mediterranean Sea – and many                                     such as the metropolitan areas of Rome
   other smaller islands. Italy is spread over                             and Naples, or the Po Valley, which alone
   some 301,338 km2 and is characterized                                   accounts for almost half of the national
   by a temperate seasonal climate. With                                   population, are densely populated, vast
regions, such as the Alps, the Apennine       and Spain (7.4%).
highlands, the plateaus of Basilicata,        Nowadays, the Italian economy suffers
and the island of Sardinia are only very      from numerous problems. After a
sparsely populated. Italy is divided into     strong GDP growth of 5–6% per year
20 regions, five of which are having a        from the 1950s to the early 1970s, and
special autonomous status that enables        a progressive slowdown in the 1980s
them to enact legislation on various local    and 1990s, the last decade’s average
matters. The country is furthermore           annual growth rates performed rather
subdivided into 110 provinces and 8,100       poorly at 1.23%, whereas the average
municipalities.                               annual growth of the EU was at 2.28%.
Due to the longitudinal extension of          The stagnation of economic growth,
the Italian peninsula, and its largely        and the political efforts to revive it with
mountainous internal conformation,            massive government spending from the
Italy’s climate is highly diverse. In the     1980s onwards, eventually produced
inland of the northern and central regions,   a severe rise in public debt. According
climate classifications range from humid      to the EU’s statistical office, Eurostat,
subtropical to humid continental, as well     Italian public debt rose to 116% of GDP
as oceanic along the coasts. The climate      in 2010, resulting in the second biggest
of the Po valley region is continental        debt ratio after Greece (with 126.8%).
and, therefore, characterized by harsh        However, a major difference between
winters and hot summers. The coastal          Greece and Italy constitutes the fact

                                                                                            Market Handbook CHP
areas of Liguria, Tuscany and most parts      that the biggest share of Italian public
of southern Italy have a Mediterranean        debt is owned by national subjects.
climate.                                      Furthermore, Italian living standards
Italy has a relatively small number           are marked by a considerable north-
of global multinational corporations          south divide. Whilst the average GDP
in comparison to other economies of           per capita in the north exceeds the EU
comparable size; however, there is a          average by far, many southern regions lie
large number of small and medium-             significantly below this average. Italy has
sized enterprises, notoriously clustered      often been referred to as the sick man
in several industrial districts, which        of Europe, characterised by economic           61
constitute the backbone of the Italian        stagnation, political instability and
industry.                                     problems in pursuing reform programs.
In 2009, Italy was the world’s 7th largest    More specifically, Italy suffers from
exporter. Italy’s closest trade ties are      structural weaknesses which are due
within the EU, where 59% of its total         to the geographical conformation,
trade is conducted. Its largest EU trading    and the lack of raw materials and
partners, in the order of market share,       energy resources: in 2006, the country
are Germany (12.9%), France (11.4%),          imported more than 86% of its total
                      energy consumption (99.7% of solid                 3.3.3. Energy Policy
                      fuels, 92.5% of oil, 91.2% of natural
                      gas, and 15% of electricity). The Italian        The biomass sector plays a strategic
                      economy is weakened by its high public           role in Italian policy for RES: according
                      deficit as well as its lack of infrastructural   to the National Energy Action Plan
                      development, market reforms, and                 (NEAP), approved in June 2010 following
                      investment into research. On the Index           EU Directive 28/2009, biomass is
                      of Economic Freedom of 2008, the                 supposed to become the primary RES
                      country ranked 64th in the world and             by 2020, covering 44% of renewable
                      29th in Europe - the lowest rating in the        energy consumption (22.3 Mtoe) ― 20%
                      Eurozone.                                        in electric power generation, 58% in
                                                                       thermal power generation and 84% in
                      Italy suffers from an inefficient state          the production of biofuels (see Figure
                      bureaucracy,     low   property    rights        ‘NEAP’). The final energy consumption in
                      protection, high levels of corruption,           2009 was approximately 132.7 Mtoe and
                      heavy taxation and public spending that          estimates predict 145.6 Mtoe by 2020.
                      accounts for about half of the national
                      GDP. The most recent data show that              By 2020, 39% of total energy consumption
                      Italy’s spending in R&D in 2006 was equal        in Italy will be represented by electricity
                      to 1.14% of GDP which is significantly           (Figure ‘Energy Consumption’). Also by
                      lower than the EU average of 1.84%.              the year 2020, biomass will have reached
                                                                       a record of 54% of the total thermal
                      Regarding the national road network,
Market Handbook CHP

                                                                       energy produced among RS (10.5 Mtoe).
                      there were 668,721 km (415,524 mi)               However, there are no specific incentives
                      of serviceable roads in Italy in 2002,           or subsidies in favour of thermal energy
                      including 6,487 km (4,031 mi) of                 production in place at the moment.
                      motorways which are state-owned but              Structural policies are urgently needed.
                      privately operated by Atlantia. In 2005,
                      about 34,667,000 passenger cars (590             The Italian nREAP sets some targets for
                      cars per 1,000 people) and 4,015,000             the use of solid biomass in order to meet
                      goods vehicles circulated on the national        the binding targets set for 2020, and the
                      road network.                                    provisional contribution to the indicative
62                                                                     trajectory for the shares of energy from
                      In 2003, the national railway network,           RS. In 2009, the production of electricity
                      which is state-owned and operated                generated from RS was estimated at 5.3
                      by Ferrovie dello Stato, extended to             Mtoe, of which 0.38 Mtoe were derived
                      16,287 km (10,120 mi) of which 69%               from solid biomass. The target set by
                      are electrified. 4,937 locomotives and           NEAP for 2020 is 0,68 Mtoe (Table ‘RES
                      railcars are circulating on this network.        Production’, Figure ‘NEAP Target’).
                      In 2002, the national inland waterways
                      network comprised 1,477 km (918 mi) of
                      navigable rivers and channels.
                                                                      Figure ‘NEAP’: Natio-
                                                                      nal Energy Action Plan
                                                                      (NEAP): The contributi-
                                                                      on of energy generated
                                                                      from solid biomass to
                                                                      total energy consump-

                                         Figure ‘Energy Consumption’: Distribution of the
                                         three categories of renewable energy consump-
                                         tion in 2020

                                         Data processed by AIEL on NEAP source

                                                                                                Market Handbook CHP
Table ‘RES production’: Gross RES electricity production in 2009 and forecasts for 2020

                                Table ‘NEAP traget’: Expected trend of gross electricity production from bio-

                        3.3.4. Feedstock                                 composition of forest area: 95% of
                                                                         forestland is located in hilly-mountainous
   The use of solid biomass, mainly                                      areas; 60% of forests are in private
   represented by wood, has been assigned                                hands whilst the rest is owned by local
Market Handbook CHP

   a primary role as a RES. According to the                             municipalities and communities (public
   estimate reported in the National Forests                             bodies).
   and Carbon Inventory1, the Italian forest
                                                                         The area felled in 2007 amounted to
   area amounts to 8.8 million hectares
                                                                         approximately 5.5 million m3, of which
   (Mha), with a potential availability of 874
   Mt (dry basis) corresponding to 1,270
   million m3/year. The wood stock is 145                                   Figure ‘Italian Forests’: Composition Ita-
   m3/ha, and the current annual increment                                  lian forests
   is 36 million m3, corresponding to an
   average current increment of 4.1 m3/
   ha. The arable land under SRC is about
   5.000 ha (2008) and it is mainly made
   up by poplar plantations with cutting
   cycles of two years. The annual chips
   production of SRC is around 50.000 tons
   of dry matter per year.
                      The Figure ‘Italian Forests’ shows the
                                                                            Source: Pettenella, 2009
3.6 million m3 were logwood for domestic         in those based on the ORC cycle. Recently
heating purposes2, and two million m3            there has also been a growing interest in
were destined for the wood processing            gasification processes, even though this
industries. The internal wood chips              technology has still to be tested for a
production is not recorded by the national       lasting praxis performance.
statistics office yet; nevertheless, based       CHP plants in Italy are mainly fuelled with
on the plants’ consumption and the               wood chips. The Table ‘Costs of Wood
amount of chips imported, the production         Chips’ shows a comparison between
can be estimated to account for 1.2              costs of wood chips from different origins
million fresh tons per year.                     and sources (January 2012).
In conclusion it is important to note that,      The all-inclusive feed-in tariff is a new
for various reasons, forest statistics are       national support scheme for upgraded/
underestimated and characterized by a            repowered, totally or partially renovated,
certain level of uncertainty.3                   reactivated or new plants that meet the
                                                 following requirements:
  3.3.5. Business Case
                                                 • use of RES (excluding solar)
Since august 2009, there is an ‘all              • nominal real power does not exceed 1
inclusive feed-in-tariff’ in place which         MW
amounts to €280/MWh for a period over
15 years. This feed-in-tariff is applicable      Since 2003, has been the national

                                                                                               Market Handbook CHP
for the electricity produced by CHP              authority managing this feed-in-tariff,
plants whose capacities are less than 1          whilst GME (’s parent company)
MWe.                                             has been in charge of operating the
                                                 Green Certificates Market where Green
The feed-in tariff has triggered a great         Certificates (GC) are traded.
interest in CHP technologies, in particular
                                                 In the Figure ‘National Framework’,
2 ISTAT 2007                                     the main instruments used to promote
3 Pettenella, 2009

    Table ‘Costs Wood Chips’: Costs of wood chips (VAT excluded)
                      electricity generation from solid biomass     legislation, starting with the Legislative
                      are summarized.                               Decree no. 20 of 2007.
                      In 2005 Energy Efficiency Credits (EEC),      Generating units qualified as high-
                      also known as the White Certificate           efficiency CHP gain access to the EEC
                      Scheme, were introduced containing            (or white certificates) scheme, under the
                      special qualifications for biomass district   terms, conditions, and procedures that
                      heating and CHP. EECs constitute a            are specified in the Ministerial Decree of
                      market mechanism aiming to promote            the 5th September 2011.
                      energy-savings within the industrial          GSE carries out the following activities:
                      and residential sector. EECs certify the
                      reduction of primary energy consumption       • qualifying high-efficiency CHP plants
                      achieved either by improvement of             • determining the number of EECs to be
                      energy efficiency and/or the substitution     issued to high-efficiency CHP units who-
                      of fossil fuels with RES. In this context,    se owners have applied for this form of
                      1 EEC corresponds to 1 toe of energy          support
                                                                    • buying back EECs - in response to a
                      The criteria that qualify generating units    request made by a producer - at a price
                      as high-efficiency CHP are set out in         equal to the one applicable on the date
                      the Ministerial Decree, which became          of commissioning of the unit (or on the
                      effective on the 1st of January 2011. This    date of entry into force of the Ministerial
                      decree completed the implementation
Market Handbook CHP

                                                                    Decree of 5 September 2011 in the case
                      of Directive 2004/8/EC into Italian

                                                                                   Figure ‘National Framework’:
                                                                                   Current national framework
                                                                                   to promote electricity pro-
                                                                                   duction from solid biomass

of units already in operation);             (EEN 9/11).
• carrying out activities of verification   The general principles of these new
and monitoring of the supported plants      support measures, which will take effect
and notifying the Ministry of Economic      in 2013, are defined in Art. 29 of D.Lgs
Development and the producer of their       28/2011; however, the decree law has
outcome;                                    not yet been proclaimed.
• issuing the Guarantee of Origin of
electricity from high-efficiency co-gene-     3.3.6. Market Environment
ration (CHP-GO) in compliance with Le-
                                            A rough estimate of the total energy
gislative Decree no. 20 of 2007.
                                            generated from solid-biomas in 2010
In 2011, the medium value of EECs was       reached about 6.7 Mtoe, of which 0.3
around €105-106/toe saved (Figure           Mtoe were consumed in CHP plants
‘EEC price trend’). Around 56% of EECs      (Table ‘Consumption Estimates’ and
emitted over the last years are related     Figure Consumption Wood Fuel Types’).
to electricity generation purposes in
                                            Unfortunately, no statistics on electricity
the civil/private sector (Figure ‘EEC
                                            and heat produced in CHPs that use
                                            wood fuels exist in Italy yet. In any
New     requirements      regarding  the    case, according to a survey carried out
application of EEC were introduced          by ITABIA, around 61 plants comprising
in October 2011 in the Deliberation of      power plants and CHPs are in operation.

                                                                                           Market Handbook CHP
Authority for Electricity Energy and Gas    Together they produce a total energy

                                                               Figure ‘EEC price trend’:
                                                               trend of prices of Ener-
                                                               gy Efficiency Certifica-
                                                               tes (EEC)


                                                               Source: GME, data pro-
                                                               cessed by Tholos
                                                                             Figure ‘EEC Sectors’: Distribution of
                                                                             energy sectors for which EEC were

                                                                             Source: AEEG processed by Tholos

                        Table ‘Consumption Estimates’: Consumption estimates of energy generated from wood bio-
Market Handbook CHP

                        Source: Pettenella D., 2011

                                                                                   Figure ‘Wood Fuel Types’:
                                                                                   Consumption of different ty-
                                                                                   pes of wood fuel in Italy (Mt)


                      output of 436 MW. 32 plants are CHP            about 100 GWh per year.
                      plants. Across Italy, 18 CHP plants based      In Figure ‘Power Output’, the geographical
                      on ORC are in operation with a total           distribution of CHP plants and power
                      installed capacity of 13.5 MWe producing       plants is displayed.
                                                3.3.7. Regulation
Figure ‘Power Output’: Number and nominal
power output of CHP and power pants fuelled
                                              The CHP emission thresholds are defined
with wood
                                              in D. Lgs n. 152/06 Allegato 1 parte III,
                                              as reported in Table ‘Emission Threshold’.
                                              Specific      emission    threshold  can
                                              additionally be imposed at the regional
                                              level, i.e. in Piemonte and the Lombardia
                                              The approval process can be subdivided
                                              into two cases:
                                              • Conferenza dei servizi (Unified proce-
                                              dures): all the competent authorities are
                                              involved in the same meetings (region or
                                              province, municipality, health authority,
                                              fire brigades, etc.)
                                              • Declaration of activity start (DIA) to be
                                              presented to the municipality in addition
                                              to all the single authorizations required.
                                              In the first case, specific emission

                                                                                            Market Handbook CHP
                                              thresholds could be imposed on a single
                                              plant by the competent authorities
    ITABIA, 2010                              depending on the geographic location

Table ‘Emission Threshodls’: CHP emission thresholds

                      where the plant will be located.                   concern and PM10 emission threshold
                                                                         values are regularly exceeded, especially
                        3.3.8. Project Financing                         in winter, public concern with regards to
                                                                         district heating cannot be eliminated.
                      Banks are familiar with financing                  71% of all plants that are opposed by the
                      bioenergy projects with regards to                 public or residents nearby are renewable
                      biogas and biomass projects. The                   energy plants. Figure ‘Publicly Opposed’
                      market perspectives, political framework           indicates the location of these plants
                      conditions, and economic parameters                (marked with the colour red) in Italy (all
                      are usually well-known to decision
                      makers. A particular focus is put on the
                      evaluation of the long-term reliability             Figure ‘Publicly opposed’: Plants indicated in
                      and sustainability of the availability of           red are renewable energy plants that are op-
                      feedstock supplies as well as on a good             posed by the public (2010)
                      sales plan to market the product during
                      the process of granting loans and credits.
                      Investments in the Italian market are
                      considered to be ‘quite safe’ from a
                      country risk perspective. According
                      to COFACE country risk rating4, Italy
                      positions itself in the centre span.
Market Handbook CHP

                      However, the Corruption Perception
                      Index5 for the level of transparency is
                      not encouraging.

                        3.3.9. Readiness for Uptake
   Generally, CHP plants are widely
   accepted by the public. The most
   common problems are related to the
   origin, supply, and sustainability of
   biomass and its production. Another
   issue is that of particle emissions, that
   sometimes affects district heating
   systems with wood biomass. Since
   combustion particles are a health
                                                                          Source: Nimby forum
                      4 COFACE:
                      5 Corruption perceptions index 2011, http://cpi.
renewable energy sources for heat and
electricity production are included).

Usefull Links:
Facts and Figures:
• EEG – Autorità per l‘energia elettrica e
il gas
• GSE – Gestore servizi energetici:
• Inventario Forestale delle Foreste e del
Carbonio (National Forests and Carbon
• Istituto Nazionale di Statistica (ISTAT)
• APAT Lombardia
• REF Ricerche SRL
• CECED Italia
• Agriforenergy/Technical Review

                                              Market Handbook CHP
• Titoli di Efficienza Energetica/Gestore
Mercato Elettrico
• Titoli di Efficienza Energetica/Pubblica-
zione a Cura di Enea
Associations / Institutions:
• Associazione Italiana Energie Agrofore-
stali (AIEL)
• ITABIA                                      71
• Ente Nazionale per l’Energia e l’Ambiente
• FIRE Italia
• FIPER Italia
                      3.4. hUnGary

                      Hungarian   Bioenergy           Competence
                      Centre (HBCC)
                      Imre Németh
                      4 Tessedik Road
                      HU - 2100 Gödöllo
                      Tel.: +36 28 420 291

                        3.4.1.     Country Score

                      Country Score Hungary Central Transdanubia- CHP (November 2011)
Market Handbook CHP

                      In the general scoring for sector, Hungary - Central Transdanubia is rated place 44 out of total
                      81. The underlying categories that influence this result are displayed in the bar chart above.

                        3.4.2. Basic Data                               is used for agricultural purposes and
                                                                        20.5% is covered by forests. The total
72 Hungary is a relatively small country with                           cultivation area (agricultural + forest +
   a territory of 93.303 km2. It is located in                          reed + fish pond) adds up to 81.2% of
   Europe’s continental zone with moderate                              the country’s territory. The population is
   climate. The annual mean temperature                                 9,986 thousand.
   as an average of the past years is 11.2
   °C, the mean temperature in January is                               69.6% of the population lives in towns,
   -1.7 °C, and in July it is +22.5 °C. The                             including 17.4% living in the capital
   annual absolute minimum is -16.7 °C,                                 Budapest, and 30.4% live in rural
   and the absolute maximum is +35.9                                    settlements. The number of settlements
   °C. 59.5% of the country’s territory                                 is 3.154, from this 2826 (89.6%) are
rural (village) settlements, 304 (9.6%)      more restricted. They have to reach
are rural towns; the number of cities        an annual average efficiency of 75%,
with county rights is 23 (0.73%). The        and a strict schedule is to be fulfilled
number of dwellings in Hungary is            concerning the purchasing of gas and
4,348,955. From this 19.8% are located       the sales of electricity. Specialists and
in the capital, Budapest, 50.4% in rural     environmentalist have been arguing from
towns, and 29.8% in villages.                the start about the rightfulness of feed-
Useful links:                                in-tariff electricity produced in these
                                             power plants from natural gas on ‘green
• Hungarian Central Statistical Office       power price’ because gas turbine power
• Ministry of National Development           plants of less than 50 MW capacities
                                             have used the major part of the budget
• Hungarian Energy Office
                                             available for supporting green electricity.
• Energy Centre Non-profit Ltd.
                                             This sort of discrimination also harmed
                                             the market interests of combined energy
  3.4.3. Energy Policy                       producing units with capacities over 50
                                             MW, as they could sell their electricity
It caused considerable tensions that
                                             only at a lower price. Furthermore, they
combined energy producing gas turbine
                                             had to increase the price of district
power plants with capacities less than
                                             heating. Tension was relieved by the
50 MW, which are basically aiming at
                                             government in the middle of 2011 by
district heating supply were able to sell

                                                                                           Market Handbook CHP
                                             terminating the higher take-over price
their electric power for a more favourable
                                             of electricity produced by combined gas
official price (equal to green power),
                                             turbine power plants below 50 MW. In
resulting in actual economic benefit for
                                             the future the support of district heating
them. The 700 MW energy produced by
                                             will be prioritized.
these power plants make up 35% of the
total energy supply of the country. Due      The previous mandatory reception
to the fact that the electric power was      and price system (KÁT) of ‘green
sold at a higher price, these power plants   power’ is currently being reviewed
could enter the heating market with          by the government, and according to
more favourable district heating prices.     expectations the new system, called           73
These gas turbine driven power plants        METÁR, will be introduced by the 1st
for district heating purposes have quickly   of January 2013. METÁR intends to set
become popular among investors, as the       out a take-over price differentiated by
market for district heating was already      technologies and by size categories
developed, and based on the favourable       in alternative and renewable energy
remuneration, they could account for a       production. The motivation for CHP
relatively short return. The regulations     production will receive greater emphasis
for operation and remuneration of gas        together with heat utilization. It is
turbine power plants have become             expected to set out stricter sustainability
                      criteria for biomass-based energy               useful heat production when elaborating
                      production, and it will also include criteria   the new official electric power take-
                      with regards to the regional production         over price system. Instead of former
                      of energy.                                      unilateral electricity purchase supports
                      Along with this energy policy concept           they intend to implement combined heat
                      it is expected that the capacity of CHP         and electric energy support through the
                      will increase again. Furthermore, these         METÁR system to become effective by
                      processes may also be influenced                1st January 2013. The requirement to
                      by the complete liberalization of the           install combined energy production in
                      electricity and natural gas market,             newly planned, small and large power
                      which will reform price conditions to a         plant investments is of great importance
                      large extent. According to the objectives       – also with regards to GHG emission
                      of the ‘National Action Plan 2020’ the          saving and efficiency increases.
                      ratio of RES in electricity production will     Useful Links:
                      increase by 6.7% from 2011 to 2020 –            • Ministry of National Development
                      mainly in the biomass plants capable of
                      combined energy production, and even            • Hungarian Energy Office
                      new power plant blocks as well small            • Ministry of Rural Development
                      power plants would be built.
                                                                      • J. Popp, N. Potori (editor) (2011): The
   The vast majority of energy policies that                          production of biomass for energy purpo-
   have been implemented take district
Market Handbook CHP

                                                                      ses in Hungary, AKI (Research Instituti-
   heating systems into account. Previously,                          on of Agricultural Economics), Budapest
   80% of the heat energy produced here was
   supplied to the district heating networks.                           3.4.4. Feedstock
   On the other hand, two-thirds of the
   district heat sold came from combined                              Nowadays, in Hungary the vast majority
   energy production. 20% of electricity                              (81%) of power plants operate using
   was produced here. Unfortunately, the                              natural gas. The ratio of coal and
   district heating service in heat supply                            oil combustion is minimal, but oil
   of flats lately decreased from 19% to                              combustion plants which are situated
74 14.9%. Therefore, the heating market                               close to oil refineries also provide
   of combined energy production also                                 electricity and heat in cooperation with
   narrowed. This is due to the fact that in                          these combustion plants. Biomass is
   certain towns and districts the cost of                            present as raw material in 6-7% of
   district heating was higher than that of                           CHP plants. The number of biogas CHP
   individual heating; hence, several flats                           plants is approximately 50. There is one
   and houses were disconnected from                                  power plant operating with communal
   the district heating network. To stop                              waste and performing combined energy
   this unfavourable process the present                              production in the country. There is also
   government focuses on motivating                                   one biomass combined power plant with
major capacity in the country. In the           The Table ‘Biomass Potential’ displays
future, great power plant developments          the biomass potential and utilization
can primarily be implemented based              opportunities for energetic purposes in
on natural gas. From the aspect of              Hungary
raw material availability, the present          The    Table   ‘Forestry   Dendromass-
biogas production capacity in Hungary           Balance’ shows the Hungarian biomass
could be at least decupled, with                potential and opportunities.
approximately 400 plants and 300 MW
installed electricity production capacity       Useful links:
plus additional 450 MW combined heat            • Ministry of Rural Development
production capacity. Also the number
                                                • Hungarian Academy of Sciences
of small biomass power plants could be
increased 3 to 4 times, mainly based            • Association of Biomass plants
on straw. Solid-fuel (Stirling-engine) or       • Union of Biomass Product Line
vegetable oil-powered (Elsbet-engine)
CHPs, which are especially useful in            • Hungarian Biomass Competence Cen-
homestead environments as the fuel              ter
can be produced on site are is becoming         • Hungarian Biomass Association
more common.
          Table ‘Biomass Potential’: Hungarian biomass potential and utilization op-

                                                                                          Market Handbook CHP


          Source: Hajdu (2009)
                        3.4.5. Business Case                               needs to take part also in reconstruction
                                                                           programmes.        Small     power    plant
                      In Hungary, the conditions of CHP                    cogenerations or trigenerations may in
                      production in large power plants and                 the future receive support not through
                      small power plants mainly depend                     selling electricity, but by heat production
                      on state preferences. This is true for               and realization. Biogas plants applying
                      maintaining and operating existing                   cogeneration established so far have
                      capacities, as well as for establishing              almost without exception received state
                      new capacities. These are investments                subsidy for the investment. In opposition
                      demanding capital. Large power plants                to several European countries, biogas
                      can be constructed as outstanding state              plants in Hungary are not supported
                      investments, and the state probably                  through the take-over price of electricity,

                               Table ‘Forestry Dendromass-Balance‘: Forestry dendromass-balance and energetic
                               wood utilization in Hungary 2008
Market Handbook CHP


                               Source: Hajdu (2009): Hungarian biomass potential and utilization opportunities
but through non-refundable subsidies        • Union of Biomass Product Line
gained in investment application, which     • Hungarian Biomass Competence Cen-
may have a ratio between 40-50%. The        ter
desirable expansion of biogas plants in
the future also requires state subsidy,     • Green Investment System
which may even be bidirectional, first      • Association of Biomass plants
by directly supporting investments to a
smaller degree than before, and second        3.4.6. Market Environment
by increasing the take-over price of
electricity related to the current price    There is mains gas supply in 91.2% of
(11eurocent/kWh).      Several    foreign   the Hungarian settlements. The number
investors are interested in possible        of dwellings with mains gas supply is
investments      in  renewable    energy    3,396,000 (82.5%). The average monthly
production capacities in Hungary. But       gas consumption of a dwelling is 89 m3/
even though the reception is positive,      month. 33.9% of the total electric energy
due to low ‘green power’ take-over          is consumed by households. The electric
prices, the process is rather slow. This    energy consumption per household is
might be improved by the expectable         181.1 kWh/month. The ratio of district
increase in the take-over price of ‘green   heated dwellings is 14.9% related to the
power’ among the near future measures       total number of dwellings. In Budapest
of the government (METAR). In case of       this ratio is 26.6%, and in rural towns it

                                                                                          Market Handbook CHP
scattered rural settlements – homestead     is 18.6%, while in villages it is 0.22%.
settlements – which are far away even       Two thirds of the district heat comes
from mains electric networks, besides       from combined energy production. The
solar energy, cogeneration equipment        number of connected power plants
using locally produced fuel in island       participating in district heating is about
systems can be applied. These can also      400. 70% of the district heated dwellings
only be implemented by state subsidy.       have a rather poor energy performance.
The concept of the government includes
                                            The operation and expansion of CHPs
the improvement of the infrastructure
                                            is mostly influenced by the limited heat
in homestead settlements in order to
                                            market. Besides producing electricity,        77
improve the standard of living there.
                                            the main functions of large and small
Energy supply is also an important part
                                            power plants are providing district heat,
of this.
                                            and heat for flats and plants connected
The Table ‘Comparison Energy Sources’       to the district heating network. The ratio
gives an overview of prices for different   of district heating in the heating of flats
energy sources.                             has decreased during the past years.
Useful links:                               This was mainly caused by the fact that
                                            district heating had become expensive
• Hungarian Development Bank                compared to individual heating systems.
                      Table ‘Comparison Energy Sources’: Comparison of energy sources in 2010
                       Name                   Average Unit Price [HUF/ Specific Price [HUF/MJ]
                                              atroton, HUF/m3]
                       Natural Gas*           100                      2.94
                       Wood Pellets           50000                    2.78
                       Wood Briquette         50700                    2.26
                       Black Coal             47020                    1.96
                       Lignite                31900                    1.94
                       Sawed Dryed Firewood   20000                    1.11
                       Wood Chips from Energy 17900-23200**            1.0-1.29
                      * consumer prices with VAT
                      ** AKI (Research Institution of Agricultural Economics) based on BITESZ and Győri-Kert Agrárenergetikai Kft.
                      Source: J. Popp, N. Potori (editor) (2011)

   Moreover, the inflexibility of heat                                            restricting factors may be changed by
   utilization in a block of flats contributed                                    METÁR, which will replace KÁT, and
   to this change. Therefore, several                                             which will include differentiated feed in
   owners and owner occupied blocks had                                           tariffs, and will put an emphasis on heat
   themselves disconnected from district                                          utilization.
Market Handbook CHP

   heating to switch to cheaper and more                                          In Hungary the major part of CHP
   controllable individual heating. An                                            production is provided by public utility
   additional point was the termination                                           electric power plants and gas motor
   of gas compensation for combined                                               cogeneration heat centres. The share
   energy producers selling district heat,                                        of electricity produced in CHP plants
   while it partially remained on a social                                        amounts to more than 20%. Furthermore,
   basis towards the population. In most                                          more than two-thirds of the district
   of the biogas-fired cogenerations the                                          heat sold comes from combined energy
   utilization and realization of waste heat                                      production. The number of CHP plants
78 is a problem, especially during the
                                                                                  exceeds 400 (including large power
   summer period. Heat consumers which                                            plants). The total electricity production
   operate throughout the year have been                                          capacity sums up to over 2000 MW, and
   constructed or connected only in a few                                         the heat production capacity makes up
   plants. In case of CHP plants which are                                        approximately 3600 MW. 88% of all
   basically providing heat, it is typical that                                   energy plants are capable of producing
   they operate on full capacity in heating                                       heat and power at the same time Most
   periods, and during other periods they                                         of these are power plants operating with
   produce electricity and provide hot                                            gas, gas turbine, or gas motors. CHP
   water only at reduced capacity. Those
based on biogas is applied in 50 plants,     be implemented directly on the site
with a capacity of 38 MW for electricity,    of consumption would help to avoid
and 56 MW heat capacity. The electric        transportation losses.
capacity of biomass plants capable of        Useful links:
producing combined energy is 23 MW,
and the heat capacity is 36 MW.              • Union of Biomass Product Line
Several efforts have been made in the        • Hungarian Biomass Competence Cen-
past to establish mainly straw-fired         ter
combined biomass plants with an electric     • Hungarian Renewable Energy Associ-
capacity of 15-20 MW. However, partially     ation
due to the resistance of the population,
                                             • Energy Centre Non-profit Ltd.
and partially due to the unfavourable
financial conditions these plans failed.
From the aspect of raw material supply         3.4.7. Regulations
it is theoretically possible to establish
                                             The    establishment    and    operation
3-4 straw-fired CHP plants with a total
                                             cogeneration plants, the conversion of
capacity for each heat and electricity
                                             the electricity produced, the realization
of 15 MW. At the moment one larger
                                             of heat, the air-cleanliness, and
biomass power plant (with 20 MW electric
                                             environmental norms to be complied
capacities) is in operation, mainly using
                                             with are regulated by certain laws and
wood chips, but the selling of heat has

                                                                                         Market Handbook CHP
not been solved yet.
                                             The government decrees No. 66/2006
Communal power plants established for
                                             (III 27), 13/2008 (I 30), and 96/2009 (IV
the purpose of waste combustion are a
                                             24), and the government decision No.
good example for CHP. One such power
                                             2156/2008 (XI 5) include the National
plant operates east of Budapest. It would
                                             Allocation List on the emission units of
be desirable to have such power plants
                                             GHG for energy producers.
near several large towns in Hungary. It
is producing electricity and heat from       The NFM decrees No. 50/2011 (IX 30),
the fireable part of selective waste.        and No. 66/2011 (XI 30) detail the
Household-size     cogeneration     (using   supporting of heat produced related to      79
Stirling-engine powered by vegetable         combined energy production, and the
oil, natural gas, or solid biomass) small    fee of the heat produced by district heat
equipment producing electricity and          producers.
heat energy have not yet spread among        The NFM decree No. 83/2011 (XII 29)
the population, because of their high        includes the regulations related to
investment costs on the one hand,            electric energy and natural gas supply,
and due to lengthy and complicated           and to energy statistics tasks related to
licensing procedures on the other hand.      district heat price.
These decentralised plants which would
                      The NFM decree No. 2/2012 (I 31) unifies   in biogas plant investment support, and
                      the regulations – partially modifying      with own funding aw well bank sources.
                      them – related to energy production and    Due to the low ‘green take-over prices’
                      supply service.                            (11 eurocent/kW) in Hungary, the
                      Useful links:                              return on investment would have been
                                                                 unrealistically long without those state
                      • Ministry of National Development         subsidies. The biggest (20 MW) biomass
                      • Hungarian Energy Office                  plant was supported by the realization of
                                                                 the CO2 quota. This approach could be
                      • Energy Centre Non-profit Ltd.
                                                                 relevant also for future investments as
                                                                 Hungary has considerable CO2 reserves.
                        3.4.8. Project Financing                 The realization could support the
                                                                 implementation of CO2-neutral energy
   Large power plants for CHP generation
                                                                 producing projects. Based on this
   have been built over the past years or
                                                                 approach, projects were launched for
   are currently being built mainly using
                                                                 the establishment of straw-combustion
   foreign capital supported by Hungarian
                                                                 power plants with private capital lined
   state guarantees. Most of these power
                                                                 up in the background
   plants in Hungary are owned by foreign
   private investors (mainly German and                          Useful links:
   American). The state has usually issued                       • Hungarian Development Bank
   a profit guarantee. The vast majority
Market Handbook CHP

   of gas motor cogenerations and district                       • Hungarian     Economic   Development
   heating centres were built from private                       Centre
   capital. Guaranteed and high electricity
   take-over prices bound to 75% efficiency                        3.4.9. Readiness for Uptake
   resulted in a fast return on investment.
   Besides mandatory take-over and on                            The social acceptance of CHP in
   guaranteed price electricity was directly                     general can be considered favourable.
   sold to the electricity provider, heat                        Furthermore,     there     are    several
   produced was purchased by the district                        organizations supporting the sector,
                                                                 including   the     Hungarian     Energy
80 heating providers. These were almost                          Association or the Professional Alliance
   risk-free investments. However, in 2011
   the feed-in tariff for CHP plants smaller                     of Hungarian District Heat Providers, and
   than 50 kW working on natural gas                             also the Hungarian Biogas Association.
   was no longer granted, which led to a                         The implementation of coal-combustion
   higher risk on investments, and a lower                       plants had to face the strongest
   profitability of the plants. Gas motor                        resistance of the population. But also
   cogenerations of biogas plants were                           some     biomass-combustion    (straw)
   usually built with the help of 40-50%                         plants experienced strong opposition
   non-refundable subsidies given as a part                      from the population, which led to
the failure of the investments. This
opposition was concerned with the
capacity (50 MW) in case of the larger
plants, or with the location selected
(e.g. the historical wine region of Tokaj
as part of the World Heritage) in other
cases. From a professional point of
view, these were quiet reasonable
concerns since the optimal location for
small power plants combustion is in
corn producing regions where the input
material is directly available and long
transportation is redundant. Small gas
motor power plants erected in district
heat centres, however, were supported
by the population, as they kept the
district heat prices on a favourable level
due to the higher electricity feed in tariff
prices applied to them. Gas motor CHPs
implemented within biogas plants did
not face resistance of the population

                                               Market Handbook CHP
or social opposition. Concerning these
projects, however, it has to be noted
that their licensing procedure takes a
long period of time. Often 30 different
authority licences need to be obtained,
and furthermore the goodwill of
environmental civil organizations and
the population have to be gained.
Useful links:
• Union of Biomass Product Line                81
• Hungarian Biomass Competence Cen-
• Hungarian Renewable Energy Associ-
                       3.5. dEnmark

                      Danish Bioenergy Association
                      (DI Bioenergi)
                      Kristine van het Erve Grunnet
                      H.C. Andersens Boulevard
                      DK-1787 Copenhagen V
                      Tel.: +45 3377 3369

                        3.5.1. Country Score

                       Country Score Central Denmark - CHP (November 2011)
Market Handbook CHP

                       In the general scoring for sector, Denmark - Central is rated place 36 out of total 81. The under-
                       lying categories that influence this result are displayed in the bar chart above.

82                      3.5.2. Basic Data1                                bridge. The bulk of Denmark is the
                                                                          peninsula Jutland and the rest of the
                      The Kingdom of Denmark (excluding                   country consists of 406 islands, of which
                      Greenland and the Faroe Islands) has a              78 are habited, and the largest two
                      mainland area of 43 098 km2 and shares              islands are Zealand and Funen. Denmark
                      a small land border with Germany to                 also exercises sovereignty over the
                      the south. Its closest Nordic neighbour             Faroe Islands in the North Atlantic and
                      is Sweden to which it is connected by               Greenland, which is part of the North
                                                                          American continent, both of which enjoy
                      1 Energy Policies of IEA countries, Denmark 2011    autonomous self-rule. The topography of
Denmark is relatively flat with few hills,   intended to ensure that a large part
its highest point being no more than         of district heat generation is via co-
173 metres above sea level. Of the total     generation. Hence, it is not possible
surface area, 62% is used for agriculture,   for separate heat plants to exchange
which offers a great theoretical potential   taxable fuels for biomass (non-taxable).
for agricultural feedstock supply for the    Therefore, expansion with biomass can
biogas sector                                only take place if biomass is used in co-
The population of Denmark was 5.5            generated heat.
million in 2010, with 126 inhabitants/       Heating consumption must gradually be
km2, almost half of whom live on the         converted to using renewable energy. The
islands of Zealand and Funen. Almost         energy agreement of the 22nd of March
87% of the population lives in urban         2012 contains the following elements to
settlements.                                 reach the RES target in 2020.
                                             • Converting the coal production at lar-
  3.5.3. Energy Policy                       ge-scale power plants to biomass will be
                                             made more attractive by amending the
The Danish government aims at reaching
                                             Act on Heat Supply.
a share of RES in the final energy
consumption of approximately 30%.            • The CHP producers and heat consu-
50% of the energy consumption in the         mers are allowed to enter into voluntary
electricity sector is to come from wind by   agreements where the tax benefit from

                                                                                         Market Handbook CHP
2020. The RES-share in Denmark’s final       switching from fossil fuels to biomass in
energy consumption shall be rising to        the heat production can be split between
100% in 2050. Due to its characteristics     the two parties.
as a storable feedstock and a flexible       • Furthermore 35 smaller open-field CHP
energy supply, bioenergy will play a         plants that are struggling in the wake
key role in this strategy. According to      of high heating prices will be allowed to
the NREAP, the solid biomass utilization     produce cheap heating based on a maxi-
for energy generation is expected to         mum of 1 MW biomass fired boiler.
grow by 32 PJ or 8.9 TWh by 2020.
Solid biomass will therefore continue        The support scheme for the production
                                             of electricity and heat is regulated by     83
to be the main RES in Denmark also in
the future. A considerable contribution      the Promotion of Renewable Energy,
to the renewable energy sector comes         Act on Electricity Supply and Act on
and will continue to come from district      Transmission Grid Operator Energinet.
heating and co-generation heat based         dk.
on biomass. A number of conditions
promote the use of renewable energy            3.5.4. Feedstock
in district heating, e.g. biomass is non-
                                             In 2009, biomass from domestic
taxable. However, the regulations are
                                             sources represented 58% of the total
                      renewable energy portfolio in Denmark                  total domestic demand of 6.9 TWh. It is
                      and imported biomass an additional                     consumed mainly by private households.
                      14%. Woody biomass clearly dominates                   Most of the firewood volumes are
                      among the biomass assortments with                     domestically sourced, but approximately
                      a total share of 61%.2 It is followed by               0.5 TWh are imported.4
                      waste with a share of 21% and straw with               Denmark’s     potential    of   producing
                      16%. Fish oil stands for the remaining                 bioenergy from biomass has not yet
                      2% of the total.                                       been exhausted. Without causing any
                      In 1989, the government announced its                  particularly negative impact on the
                      intention to double Danish afforestation               production of animal feed and food,
                      within a century. Various steps have been              estimates show that it is possible to
                      taken towards achieving this goal. For                 raise Danish agricultural production of
                      example, a government grant scheme                     biomass for bioenergy four to five times.
                      has been established that supports                     This increase could be accomplished
                      private afforestation on agricultural land             through greater exploitation of straw at
                      and the State has also been planting                   CHP plants, slurry for biogas, animal fat
                      new forests. Recent data suggests that                 for biodiesel and the use of perennial
                      the forest cover in Denmark is larger                  energy crops as well as grass from
                      (14%) than previously estimated (11%)                  low-lying areas. It will, however, be
                      and that these forests are older than                  necessary to include parts of the land in
                      previously thought. This could change                  the production of perennial energy crops
Market Handbook CHP

                      the status of Danish forests from being a              that has formerly been set aside. The
                      net sink to be a net source in the period              technical potential may not necessarily be
                      from 2008 to 2012. An extensive survey                 realised within the economic framework
                      of Danish forests will be conducted in                 that applies today.5 The Table ‘Energy
                      2011, improving the present estimates                  Crops’ displays the      financial results
                      with up to date figures. The survey will               for energy crops in Denmark in recent
                      be finalised in 2012.3                                 years.
   The harvesting levels in Denmark are                                      The     Danish    agricultural   sector’s
   below the annual increment. However,                                      contribution to bioenergy production is
84 increasing wood supply from domestic                                      already relatively high, as 12% of the
   forests is a subject to mobilization                                      Danish energy consumption is covered
   constraints. Already today, Denmark is                                    by the use of residual products, such as
   a net importer of woody biomass for                                       straw, wood chips, and slurry. This is, in
   energy end-use. Firewood is the single                                    particular, a result of the use of these
   largest biomass assortment used with a
                                                                             4 PÖYRY MANAGEMENT CONSULTING, Evaluation of
                      2 PÖYRY MANAGEMENT CONSULTING, Evaluation of           options to enhance the nordiccooperation inthe field
                      options to enhance the nordiccooperation inthe field   of solid biomass for energy purposes
                      of solid biomass for energy purposes                   5 Ministry of food, Agriculture and Fisheries, Report
                      3 Energy Statistic 2010                                on Biomass
      Table ‚Energy Crops‘: Financial results for full-time holdings by item and time

                                                                                                       Market Handbook CHP
residual products in the CHP sector .               The generation of RES-H is supported
                                                    through tax exemptions. In CHP plants,
  3.5.5. Business Case                              the heat produced from biomass and
                                                    biogas is exempted from energy taxes.
The prices for wood pellets have                    Biomass in general is non-taxable and
increased significantly during the 1997-            since it is considered as being CO2 neutral
2010 period. This development has been              it is also exempted from CO2 duty.6
driven by the increase in wood prices
                                                    In Denmark the RES-E production is                 85
and also by increasing demand. Prices
                                                    supported through price premiums that
for straw and woodchips have been
                                                    are paid on top of the market price
more stable. It can also be noted that
                                                    but are mostly capped at a maximum
woodchip prices have consistently been
                                                    amount of market price plus premium.
above straw prices (Figure ‘Biomass
                                                    The instruments are prepared and
                                                    managed by the Danish Energy Agency.7
The price trends for the different biomass
assortments are expected to be similar
                                                    6 ECOFYS, Renewable energy policy country profi-
in the coming 20 year period (Figure                les
‘Biomass Price Prognosis’).                         7
                      Figure ‘Biomass Prices’: Historical biomass prices 1997-2010

                      Source: pöyry management consulting, evaluation of options to enhance the nor-
                      dic cooperation in the field of solid biomass for energy purposes

                      Figure ‘Biomass Price Prognosis’: Biomass price prognosis 2010-2030
Market Handbook CHP


                      Source: pöyry management consulting, evaluation of options to enhance the nordic
                      cooperation in the field of solid biomass for energy purposes
Some projects can be supported by more             prices, the possibility to produce cheap
than one support measure. For example,             heating based on a maximum of 1 MW
in CHP plants, the heat produced using             biomass fired boiler.
biomass is exempted from energy taxes,             In the new energy agreement of the
and electricity receives feed-in tariff            22nd of March 2012 several initiatives to
premiums. RES-E producers receive a                promote the use of district heating will
variable premium on top of the wholesale           be taken.
electricity price. The sum of the premium
and the market price shall not exceed              • An implementation for an expansion of
a certain statutory maximum, which                 the biogas sector has been agreed upon.
depends on the date of connection of the           The overall support for biogas used for
system and the source of energy used.              co-generation is being increased to
In certain cases, system operators are             €15.46/GJ (115 DKK / GJ) in 2012.
granted a guaranteed premium and are               • From 2016 onwards, it will no longer
thus not subject to a statutory maximum.           be possible to install boilers in existing
The persons entitled to the payment of a           buildings in areas with district heating or
premium are owners of systems for the              natural gas as alternative.
generation of electricity from RS.
                                                   • A fund will be established to promote
New CHP units producing electricity                efficient use of renewable energy in pro-
by burning biomass will receive a                  duction processes in the industry. The
guaranteed premium of €20.2/MWh                    aid is given as grants for projects that

                                                                                                 Market Handbook CHP
(øre 15/kWh). Biopower production is               replace fossil fuels with renewable ener-
subsidized in order to increase the use            gy or district heating and energy effici-
of biomass for electricity generation.             ency improvements directly related to
All sizes of installations are eligible for        these conversion projects. Companies
the support, and there are no specific             that currently use DH in their process
requirements for e.g. compliance with              may instead choose to continuously re-
energy efficiency criteria. The subsidy            ceive a grant for their additional costs
was amended by the RE Act in 2009 and              of up to €5.68/GJ (42 DKK/ GJ) if co-
has no fixed end date at current time.8            generation is converted to biomass and
Since the open-field plants were built             assuming that the scheme is approved          87
in the 1990s, some of them have                    by the EU under State aid rules.
fought with very high heating rates                • The Danish government will set aside
which concern about 1% of the district             €33.78 million (DKK250 million) in 2013
heating consumers. In the new energy               and €67.57 million (500 million DKK) an-
agreement a help package gives 35                  nually from 2014 to 2020. The scheme
smaller open-field CHP plants that are             will be evaluated during the first half of
struggling in the wake of high heating             2015.
8 ECOFYS, Renewable energy policy country profi-   • A subsidy of €4.05 million (DKK30 mil-
                      lion) is introduced annually from 2013 to       Mtoe, making Denmark a net exporter of
                      2020 to maintain and promote industrial         energy. The share of renewables in TPES
                      cogeneration in the industry and garde-         is relatively high at 20.7%, largely wind
                      ning sectors which are financed through         and biomass. In 2010, oil accounted for
                      a supply fee.                                   over half (54%) of Denmark’s indigenous
                      • The funding for expanding renewable           energy compared to 64% in 2004 when
                      energy that is supplied to the electricity      domestic oil production peaked. The
                      and gas grids is to be financed via the         share of natural gas in total energy
                      PSO (Public Service Obligation) schemes         production was 31% in 2010 compared
                      and thus by the energy bill. A security         to 34% in 2008. In 2009, the remaining
                      of supply taxes on space heating is to          15% of indigenous energy production
                      be introduced to cover government fun-          came mainly from biomass (12%) and
                      ding for biogas, industrial CHP, energy         wind power (3%). Denmark generated
                      savings packages in privately owned             38.6 TWh of electricity in 2010, largely
                      rental properties, renewable energy in          from coal (44%), natural gas (20%) and
                      businesses, as well as the government’s         wind power (20%). In 2010, Denmark
                      loss of taxes due to lower consumption          imported 10.6 TWh of electricity mostly
                      of fossil fuels.                                from Norway and Sweden, and exported
                                                                      11.7 TWh mostly to Germany.
                      Useful links:
                                                                      Denmark has one transmission system
                      • Danish Energy Agency                          for gas, owned and operated by
Market Handbook CHP

                      • Danish ministry of Climate, Energy  , on behalf of the Danish
                      and buildings                                   State. Transmission tariffs are based on
                                                                      an entry-exit model and the same tariffs
                      • Danish District Heating Association
                                                                      apply to all entry and exit points. The
                                                                      natural gas transmission system consists
                        3.5.6. Market Environment                     of upstream pipelines in the Danish part of
                                                                      the North Sea and onshore transmission
   The total primary energy supply (TPES)
                                                                      pipelines. The transmission pipelines
   in 2010 was 19.7 million tonnes of oil
                                                                      go north-south (Aalborg-Ellund) and
   equivalent (Mtoe). Energy production
88 amounted to 23.2 Mtoe, which was below                             west-east (Nybro-Dragør). The natural
                                                                      gas transmission system also includes
   2009 levels and indicative of falling oil
                                                                      a gas treatment plant (Nybro) and
   and natural gas production over the past
                                                                      two underground gas storage facilities
   six years.
                                                                      (Stenlille and Lille Torup). The Danish
                      Denmark is a net exporter of oil and            gas transmission grid is connected to the
                      natural gas and can be expected to remain       German gas transmission grid at Ellund
                      so at least until the end of 2018 for oil and   on the Danish/German border and to the
                      2020 for gas. Energy exports were 17.2          Swedish gas system at Dragør. Sweden
                      Mtoe in 2010 while imports were 13.8            is solely supplied with gas via the Danish
gas system.                                   Figure ‘Heating Installations Homes’:
The electricity transmission system in        Heating installation in homes
Denmark is separated both operationally
and geographically into two parts, the
west (Jutland and Funen) and the east
(Zealand). In 2005, was
established, as a single state-owned
transmission system operator, by
merging two system operators: Elkraft
in western Denmark and Eltra in eastern
Denmark. Geographical separation ended
in 2010 when the Great Belt Power Link
connecting western and eastern areas
with 400 kV direct current (DC) cables
was commissioned. Despite separation
within Denmark, the eastern area was
already connected with Sweden and             Source: Statistics Denmark
the western area was connected with
Norway and Sweden. Therefore, both           1990s, the number of district heating
areas had been able to trade electricity     installations and natural gas boilers
through the Nordic market even without       continued to increase substituting oil-

                                                                                          Market Handbook CHP
the Great Belt Power Link. The 6 300         fired boilers.
km long Danish transmission system           As of the 1st of January 2011, the total
consists of 400 kV and 150/132 kV lines.     of 2.75 million heating installations are is the owner of the 400         as follows: District heating installations
kV facilities, as well as part of the 132    61.7%, natural gas boilers 15.2%, oil
kV facilities, the Great Belt Power Link     boilers 13.3%, and other installations,
and interconnection lines with Norway,       including log wood boilers and electric
Sweden and Germany. Most of the              heating, 9.8%.9
150/132 kV transmission facilities are
owned by nine regional grid companies.       In 2010 district heating amounted to
                                             35.5% of household energy consumption.
The significant changes in the composition   District heating production is generated
of energy consumption reflect changes in     at large-scale CHP units (46%), small-
the composition of heating installations     scale CHP units (19%), district heating
in homes over time (Figure ‘Heating          units (19%) and by autoproducers, such
Installations Homes’). Until the mid-        as industrial enterprises, horticulture
1980s, oil-fired boilers clearly dominated   and waste treatment enterprises (15%).
the market, after which district heating     About 62% of the Danish housing is
became the most common source of
heat. In the late 1980s and during the       9 Statistics Denmark
                      supplied with district heating. The 55              converted to small-scale CHP generation.
                      to 60 largest enterprises supply 60% of             The same period saw an increase in
                      district heating . In 2010, 77.2% of the            production by private CHP units. Total
                      district heating was produced together              district heating production was 150.0 PJ
                      with electricity. The corresponding                 in 2010. This constituted an increase of
                      figures in 1990 and 1980 were 58.8%                 14.9% compared to 2009, caused by the
                      and 39.1%, respectively. The remaining              considerably colder weather. Compared
                      22.8% is produced at smaller plants                 to 1990, the production of district
                      which primarily produce heat . There                heating has grown by 62.3% resulting in
                      are about 600 suppliers of DH of which              an increase of 90% compared to 1980.
                      200 district heating plants and 15 CHP              District heating is a large end-user of
                      plants are fuelled by solid biomass and             biomass to energy in Denmark. In 2010,
                      30 biogas-fired CHP plants.10                       solid biomass and biogas contributed
                      Figure ‘Producer Type’ displays that                52,085 TJ to renewable heat production,
                      since the late 1980s and during the                 representing 39% of total renewable
                      1990s, the share produced at small-                 energy production. Biomass-fuelled DH
                      scale units increased as purely heat-               and CHP plants have been a common
                      generating district heating units were              part of the Danish electricity and district
                                                                          heating supply for decades. In 2010,
                      10 Energy Policies of IEA countries, Denmark 2011   39% of the fuel mix was biomass mainly
                      review                                              consisting of straw (9%), woody biomass
Market Handbook CHP

                                                                          (18%), and waste (10%) .
                       Figure ‘Producer Type’: Electricity production
                       by type of producer                                Figure ‘Fuel Consumption DH’ shows that
                                                                          there was a significant change amongst
                                                                          the fuel used in the production of district
                                                                          heating in the period from 1980 to 2010.
                                                                          In 2010 the distribution was: biomass
                                                                          38.7%, natural gas 29.6%, coal 18.9%
                                                                          and oil 4.5% Consumption of natural
                                                                          gas and renewable energy etc. has
90                                                                        increased year by year. In 1990, the
                                                                          share of natural gas and biomass etc.
                                                                          was 17.4% and 24.9%, respectively. The
                                                                          percentage of oil fell sharply from 1980
                                                                          to 1990, and has subsequently remained
                                                                          more or less constant. Consumption of
                                                                          coal decreased significantly from 1990 to
                                                                          2010. In 1990, this constituted 44.2% of
                                                                          the total consumption of fuel for district
                      Source: Energy Statistics 2010                      heating.
      Figure ‘Fuel Consumption DH’: Fuel consumption in district heating production

      Source: Energy Statistics 2010

An analysis of the future role of district       ries, Report on Biomass
heating in the energy supply will be             • Annual statistic
prepared and presented by the end of

                                                                                             Market Handbook CHP
2013. The government has set aside €0.4
million (DKK3 million) for this analysis.
                                                    3.5.7. Regulation
Moreover an analysis of the development          CHP plants are regulated by the Act on
of bioenergy in Denmark will be prepared.        Electricity Supply and by the Act on Heat
This analysis will focus on whether there        Supply, because the plants produce both
are appropriate conditions in place that         electricity and heat. The plants vary
ensure an efficient and environmentally          in size and production methods and
sustainable use of biomass resources in          are as such regulated differently. The
the Danish energy supply. The analysis           centralized CHP plants are exclusively
must assess the CO2 displacement                 subject to the Act on Electricity Supply,    91
as well. A total of €1 million (DKK7.5           while the district heating transmission
million) in the period from 2012 to 2015         pipelines must be approved by the Act
will be set aside for this analysis by the       on Heat Supply. The large decentralized
Danish government. The analysis will be          CHP plants (over 25MW) are also subject
presented by the end of 2013.                    to the Act on Electricity Supply and
Useful links:                                    the district heating transmission and
                                                 distribution pipelines are regulated by
• Danish Energy Agency
                                                 the Act on Heat Supply. The small-scale
• Ministry of food, Agriculture and Fishe-       CHP plants (below 25 MW) are regulated
                      only by the Act on Heat Supply.11                   heat plans based on feasibility studies.
                      The DEA has set the general conditions              The heat supply system for a building
                      for the establishment and operation                 is chosen according to the heat plan
                      of district heating. These conditions               of the area. The rules concerning the
                      are intended to ensure that both cost-              feasibility study of alternative/RES
                      effectiveness and consumers' heating                systems are determined by the Act on
                      costs are taken into consideration. The             Heat Supply. The objective of this Act
                      Danish Energy Regulatory Authority                  is to promote the most socio-economic
                      (DERA) and the Energy Supplies                      and environmentally friendly utilization
                      Complaint Board monitor the district                of energy for the supply of heat and hot
                      heating sector and handle complaints                water to the buildings and reduce the
                      regarding prices and conditions. The                dependency of the energy system on oil.
                      district heating sector is owned and                In certain areas there is an obligation for
                      operated in various ways. There are                 buildings to connect to a district heating
                      cooperatives, joint-stock companies,                system. Only new low energy buildings
                      and local authority companies (often                are dispensed from this obligation.13
                      interest group companies and local         supervises all important
                      authority supply bodies). In the district           procedural     steps    related    to   the
                      heating market, both production and                 promotion of RES-E. Furthermore,
                      network companies are monopolies and                renewable energy is subject to the
                      regulated as non-profit undertakings.               general statutory provisions related to
Market Handbook CHP

                      DERA monitors their prices and their                the supervision of the electricity market.
                      terms of delivery, and takes regulatory             The electricity market is supervised by an
                      action if the prices and terms of the               independent commission (Energitilsynet
                      network companies are not in line with              - Danish Energy Regulatory Authority),
                      the non-profit regime.12                            which was established by the Ministry
   Danish local authorities are the central                               of Environment and Energy. The
   players in the public heat supply;                                     instruments are revised from time to
   they develop heating plans and are                                     time, according to the situation in the
   responsible for expanding district heating                             market. Historically the level of support
92 and for implementing any changes                                       has changed numerous times, but it is
   made necessary by amendments to the                                    a general rule that the support scheme
   regulations in the Act on Heat Supply.                                 which was in place when a production
                                                                          unit was connected to the grid, applies
                      The obligations to use RES in new                   for the lifetime of the production unit. As
                      buildings are applied not on the building           a result there is a high level of certainty
                      level, but on the energy system level.              about future support at the time of
                      Municipalities are obliged to set up                investment.
                      11 Danish Energy Agency
                      12 Energy Policies of IEA countries, Denmark 2011   13 ECOFYS, Renewable energy policy country profi-
                      review                                              les
Denmark followed other Nordic countries             Since Denmark is located at the interface
and commenced the process of electricity            between the Nordic region and Germany,
supply-market liberalisation in the                 it is impacted not only by the Nordic
early 1990s. Nord Pool was established              market but also by the Central-Western
in 1996 and became the integrated                   European (CWE) market. Accordingly,
regional electricity market for the entire          in November 2009, the European
Nordic region. Partial retail competition           Market Coupling Company (EMCC) on
commenced in 1998 and was followed                  the Danish-German border coupled the
by full market opening in 2003. DERA                Nordic and German day-ahead markets
is the independent regulatory body that             at two interconnections.
oversees the electricity market. DERA               The determination of emission limits are
regulates network tariffs for transmission
and distribution and determines the level              regulated by the Environmental
of obligation to supply tariffs (a last-            Protection Agency. For combustion
resort service).14                                  installations with a rated thermal input
                                                    exceeding 50 MW, emission limits are set
According to the Act on Electricity Supply,         by the ordinance on limitation of certain
the grid operator is statutorily obliged to         atmospheric pollutants from large
expand the grids in order to guarantee              combustion plants (Bekendtgørelse om
the efficient transmission of electricity.          begrænsning af visse luftforurenende
Whenever possible, the national target              emissioner fra store fyringsanlæg).
of increasing the competitiveness and               This ordinance sets limit values for SO2,

                                                                                                 Market Handbook CHP
use of RES is given special attention.              NOx and dust. The Order distinguishes
The connection policy is shallow with               between existing and new facilities.
well established and transparent rules              The ordinance will be replaced by the
for calculating costs. RES projects only            Industrial Emissions Directive, which will
pay the cost that would have incurred               be implemented in Denmark in January
in case of being connected to the (local/           2013.
nearest) grid irrespective of whether the
grid company selects another connection             All installations that are covered by
point. The costs for grid reinforcement             specific regulations and those that are
are met by the DSO and TSO. In cases                not must comply with the limits in the       93
where the RES project wishes to connect             Danish air quality guideline.
at a higher voltage level (than 10-20kV),           Useful links:
the additional connection costs have
                                                    • Ordinance
to be paid by the project, but not the
reinforcement costs.15                              • Environmental Protection Agency
                                                    • Department of Environmental Science
14 Energy Policies of IEA countries, Denmark 2011   at the university of Aarhus
15 Energy Policies of IEA countries, Denmark 2011
                        3.5.8. Project Financing                          The easiness of getting a credit from
                                                                          banks is dependent on individual project
                      Investments in Danish markets are                   designs as the reliability of the chosen
                      considered to be ‘safe’ from a country              technology, the security of feedstock
                      risk perspective, according to established          supply security, and price risks are being
                      rating agencies. Reliability and credit             assessed.
                      worthiness of the Danish economy is
                      rated with best scores at Standard &
                                                                             3.5.9. Readiness for uptake
                      Poor’s16 and Moody’s. COFACE country
                      risk rating sees Denmark at the top of              Key institutions22
                      the score. 17The same holds true for the
                                                                          The Danish Ministry of Climate, Energy
                      Corruption Perception Index measuring
                                                                          and Building (previously known as the
                      the level of transparency.18 The ease
                      of doing business is seen to be quite               Ministry of Climate and Energy),
                      favourable in Denmark by the IFC World              established in November 2007, was
                      Bank.19                                             created as a part of the government's
                                                                          increased efforts to promote a greener
                      The Danish Krone has remained within
                                                                          and more sustainable society. The
                      the EMS and has been part of the new
                                                                          ministry is responsible for national and
                      exchange-rate mechanism (ERM II)
                                                                          international efforts to mitigate climate
                      since the introduction of the Euro. It
                                                                          change, as well as for energy, national
                      may fluctuate within a 2.25% range of
                                                                          geological surveys in Denmark and
Market Handbook CHP

                      the Euro.20 The average inflation rate in
                                                                          Greenland, and for meteorology.
                      the period from 2006 to 2010 was 2.1%.
                      Inflation is not expected to stay within            The Danish Energy Agency (DEA) was
                      the Euro target area of just below 2%               established in 1976, and is an agency
                      in 2011. For 2011 and 2012 inflation                under the Ministry of Climate, Energy
                      is expected to be at 2.6% and 1.8%                  and Building. It is responsible for all tasks
                      respectively.21                                     related to the production, transmission
                                                                          and utilisation of energy, and its impact
                                                                          on climate change. Its principal function
                      16 Standard & Poor’s, http://www.standardand-
                                                                          is to ensure the legal and political
94                                                                        framework for reliable, affordable and
                      17 COFACE:
                      tal/COM_en_EN/pages/home/risks_home/coun-           clean supply of energy in Denmark.
                      AREA_04&crating=&brating                  , the transmission system
                      18 Corruption perceptions index 2011, http://cpi.
                                                                          operator, is an independent public
                      19 IFC, Doing Business Index: http://www.doing-     enterprise owned by the Danish State
                                           represented by the Ministry of Climate,
                                                                          Energy and Building. It owns the natural
                      21       22 Energy Policies of IEA countries, Denmark 2011
                      foraarsprognose2011/                                review
gas transmission system and the 400          the Ministry of Economic and Business
kV electricity transmission systems          Affairs, the Ministry of the Environment
and is the co-owner of the electricity       and the Ministry of Finance. The
interconnections to Norway, Sweden           Commission published its findings in
and Germany. It is responsible for           September 2010 and ceased its activities
maintaining security of supply and           in November 2011.
ensuring the smooth operation of the
market for electricity and gas. Energinet.
dk was established in 2005 following a
merger between Eltra, Elkraft System,
Elkraft Transmission and Gastra.
The Danish Energy Saving Trust is
an independent body established in
2010 as a trust under the auspices of
the Ministry of Climate, Energy and
Building, replacing the Danish Electricity
Saving Trust. The scope of the previous
organisation's work has been expanded
from electricity savings to cover savings
and more efficient use of all forms
of energy in every sector other than

                                                                                        Market Handbook CHP
The Danish Energy Regulatory Authority
(DERA) oversees the electricity, natural
gas and district heating markets. DERA
is an independent authority and its board
members are appointed by the Minister
of Climate and Energy. Its decisions can
be appealed to at the Danish Energy
Board of Appeal.
The independent Danish Commission on
Climate Change Policy was established
by the government in 2007 and was
charged with the task of identifying the
long-term climate and energy policies
needed to achieve independence from
fossil fuels. The Climate Commission’s
proceedings were attended by the
Ministry of Climate, Energy and Building,
                      3.6. swEdEn

                      Swedish Bioenergy Association
                      Lena Dahlman
                      Torsgatan 12
                      SE-11123 Stockholm
                      Tel.: +46 8 441 70 80

                        3.6.1. Country Score

                      Score Sweden Middle Norrland -CHP
Market Handbook CHP

                      In the general scoring for sector, Sweden - Middle Norrland is rated place 52 out of total 81. The
                      underlying categories that influence this result are displayed in the bar chart above.

                        3.6.2. Basic Data                                average, 21 inhabitants live per square
                                                                         kilometre whereas the population is
96 Sweden is one of the most northern
                                                                         mostly concentrated in the southern
   states of the EU. Since its lands are                                 half of the country. About 85% of the
   stretched over the Arctic Circle, the                                 population lives in urban areas. Sweden's
   agricultural gradient of the country is                               capital city is Stockholm, which is also the
   a steep one. Sweden consists of eight                                 largest city. The country is characterised
   NUTS2 regions. With a surface of                                      by its long and narrow shape with the
   450,295km2, Sweden is the third largest                               main part of the population spread over
   country in the EU; however, with a total                              the middle and southern parts of the
   population of about 9.4 million it is only                            country.
   the fourteen most populated one. On
Useful links:                                market for bioenergy. The introduction
• Swedish Energy Agency                      of green electricity certificates also
                                             introduced a large investment trend in
• Swedish Board of Agriculture               CHP facilities.
• Official Swedish Statistics                Swedish energy policies are unique in
• EUROSTAT                                   the EU, as there are no feed-in tariffs
                                             or mandates in place. The incentives
  3.6.3. Energy Policy                       and support systems are designed
                                             to be very general in accordance with
The Swedish government aims at               PPP. Fossil energy is taxed higher than
reaching a share of RES on final energy      renewable energy in order to make the
consumption of 50% in 2020, and a            latter competitive on the market. The
balance of zero net CO2 emissions            taxation combined with investment
by 2050. Due to its characteristics of       support for emerging technologies has
storable feedstock and flexible energy       been very successful, and created a
supply, bioenergy will play a key role in    strong market growth. Sweden has no
this strategy. Sweden has had targets        binding or dedicated targets on specific
and policies in place to support renewable   energy forms. All policies are set to be
energy for a long time and since 1980        technology neutral. There are therefore
it has focused on the development of         no specific targets for CHP in Sweden
bioenergy and hydro energy. Only the         and no specific measurements included

                                                                                         Market Handbook CHP
last ten years have moved a larger           in the nREAP plans, apart from the
focus on wind and solar energy. Today,       general incentives for renewable energy.
bioenergy is the largest energy source in    Renewable electricity is, apart from
Sweden, and the third largest electricity    the general incentive structure, also
source after hydro and nuclear power.        supported by the use of green electricity
The renewable energy share in 2011           certificates.
amounted to 48,9% putting Sweden             Electricity from CHP is the third largest
well ahead on its way to meet the            electricity source in Sweden today. CHP
2020 target. With the introduction of        is a profitable energy solution on the
the carbon tax in 1991, Sweden has           market without any bioenergy dedicated      97
installed a strong policy instrument that,   support.
supported by the high and fluctuating
fossil fuel prices, has lead to a large      There are no announced policy changes
market gain for the cheaper domestic         for this market and the market actors
bioenergy. These two points combined         view the policy conditions as stable.
with high political ambitions triggering     Useful links:
investments in district heating systems
                                             Laws and Ordinances:
in many municipalities in the period of
1980-1990, has lead to a large heat          • Energy Tax Law
                      Green electricity certificates                     is only a minor use of agricultural
                      • Lag (2011:1200) om elcertifikat                  crops. Waste has also increased as
                                                                         an important feedstock for energy
                      Institutions:                                      production. Used wood materials also
                      • Swedish Energy Agency                            constitute a growing market in Sweden.
                                                                         The feedstock for CHPs are mainly made
                      • Swedish Board of Agriculture
                                                                         up of residues from forest industries,
                      • Swedish Board of Forestry                        wood pellets, wood briquettes, waste
                      Associations:                                      and in some cases recycled wood. The
                                                                         use of perennial energy crops is minimal
                      • Swedish bioenergy association                    in Sweden (SRC Willows on 13000 ha).
                      • Swedish district heating association             Also the use of more grassy energy crops
                                                                         is only in the pilot stage. For relatively
                      • Swedish energy association
                                                                         large CHP plants wood pellets are not
                      • Swedish waste associatin                         that common as a feedstock. Peat is also
                                                                         used in some plants as a fuel additive,
                        3.6.4. Feedstock                                 most commonly with a mix up to 10%.
                                                                         The majority of woody biomass is made
                      The Figure ‘Potential Biomass’ at the              up of residues from forest industries or
                      bottom of the page give an overview                GROT (Branches, wood tops left from
                      over the potentials of Swedish biomass             clear fellings). Fellings of mature forest
                      supply. As Sweden is a forest rich
Market Handbook CHP

                                                                         in order to obtain biomass for energy
                      country, forest biomass has traditionally          generation do not exist.
                      been used for energy production. There
                                                                         Fuels are not believed to be limiting for

                          Figure ‘Biomass Potential’: Potentials for biomass (TWh)
                                                                                       Potentials for biomass
                                                                                       Svebio has estimated
                                                                                       potentials    for   the
98                                                                                     supply of bioenergy
                                                                                       available   in    2020,
                                                                                       here compared to teh
                                                                                       utilisation in 2009.
                                                                                       The largest remaining
                                                                                       potentials     are    in
                                                                                       agriculture and in
                          Source: Svebio
the development of district heating in         3.6.5. Business Case
Sweden; however, the main hindrance
for the further development are large       Due to their great profitability, all larger
investment costs relative, the uncertain    biomass-based energy production plants
policy situation, as well as a shortage     have installed electricity generation.
in heating and/or cooling demands.          Electricity from biogas as well as green
Regarding the future development of the     electricity from other RES is eligible for
CHP market, there is a large focus on       green electrical certificates.1 Whereas
small-scale CHP solutions and combined      producers of renewable electricity are
solutions, such as various forms of         issued green electricity certificates that
biorefineries.                              they can then choose to sell on the open
                                            market, other electricity providers or
Although the demand for wood chips has      buyers have to buy a certain amount of
increased over the last years, Swedish      green electricity certificates. The price
forests are far from overexploitation.      for the certificates is determined by the
The supply of wood chips is sufficient      market. So far, the green certificates
for a stable supply of CHP-plants for a     have added 50 – 100% to the actual
couple of years, even in the case that      market price. As the prices of these
the number of plants was to increase.       green electricity certificates are set by
Nevertheless, suppliers of raw materials    the market instead of being fixed by
have been exploring alternatives for        legislation, they might fluctuate over
several years, especially SRC with salix    time. However, the prices tend to be

                                                                                                        Market Handbook CHP
or willow. The potential to increase the    relatively stable over longer periods and
availability of biomass remains to be       predicted values of a green certificate
large, in particular with regards to the    are regularly published on Nordpoolspot.
agricultural sector. Svebio has estimated   com.2
the potentials for bioenergy supply
available in 2020 and compared them to      All bioenergy fuels are exempted from
the already used amount in 2009. Figure     the energy as well as the carbon tax
1 shows that the largest remaining          (see Figure ‘Carbon Tax’). Biomass is
potentials lie in the agricultural and      furthermore viewed as carbon neutral
forestry sector.                            in the ETS system. There is, however,
                                            a general electrical tax that differs
Useful links:                               regionally and which is dependent on
• Swedish Energy Agency                     usage. Industries and sea transports pay
                                            0,05 SEK/KWh, whilst other consumers
• Swedish Board of Agriculture
                                            pay 0,292 SEK/KWh. Some regions have
• Swedish Board of Forestry
• Official Swedish Statistics               1 Law on green electricity certificates (2011:1200),
                                            in Swedish -
• EUROSTAT                                  lag/20111200.htm
                                            2 Offical trading site for green electricity certificates
                      a rebate on these taxes, with a reduced        cost competitive in all markets outside
                      electricity tax of 0,192 SEK/KWh. All of       of the ETS (see Figure ‘Carbon Tax’).
                      these regions are municipalities located       Unfortunately the loss of the carbon tax
                      in Norrbottens län, Västerbottens län,         for this sector could not be compensated
                      and Jämtlands län. In Västernorrlands län      since the value of carbon emission rights
                      the municipalities of Sollefteå, Ånge, and   have been too low and because emission
                      Örnsköldsvik pay a lower electricity tax.      rights have been given out too freely.
                      In Gävleborgs län it is the municipality       Another sector where bioenergy has not
                      of Ljusdal that pays a lower electricity       yet become the most commonly used
                      tax. In Värmlands län, the municipality        fuel is the one of midsized industries
                      of Torsby, and in Dalarnas län the             that benefit from a reduction of the
                      municipalities of Malung-Sälen, Mora,          carbon tax. However, as the carbon
                      Orsa, and Älvdalen have this rebate.          tax for these instalments was raised
                      Due to the steady increase of the              in 2011 (up to 30%), and will be raised
                      carbon tax, bioenergy has become               again in 2015 (up to 60%), it is expected
                                                                     that these companies will also show an
                                                                     increased market interest for bioenergy.
                           Figure ‘Carbon Tax’: Influence of
                           CO2 tax on energy prices                  As industries and district heating
                                                                     systems that are included in the ETS
                                                                     system do not have the same incentives
                                                                     to change to renewable heat, the
Market Handbook CHP

                                                                     degree of biomass use varies. Whereas
                                                                     industrial applications still rely on fossil
                                                                     fuels, district heating plants targeting
                                                                     the consumer markets tend to have a
                                                                     much higher share of biomass usage.
                                                                     The bioenergy market with its trading of
                                                                     green electricity certificates is a stable
                                                                     one, with a stable price situation for
                                                                     biomass and several trading actors. The
100                                                                  quarterly price indexes from the Swedish
                                                                     energy agency3 are helpful when
                                                                     assessing future bioenergy prices. One
                                                                     interesting market development comes
                                                                     from one of the participating companies
                                                                     in the Crossborder Bioenergy Project:
                                                                     ENBIO just introduced a biofuel trading
                                                                     3 One example of a price sheet: SVERIGES OF-
                                                                     FICIELLA STATISTIK STATISTISKA MEDDELANDEN
                                                                     EN 0307 SM 1202 se more on http://energimyn-
market where bioenergy actors can            require a more advanced market model.
trade and market their biomass volume        The biggest market concerns for
on an open and public site, even further     increased market growth of CHP in
increasing the market’s transparency.        Sweden is the future development of the
Although investments in CHP plants           prices of green electricity certificates, as
are not subject to direct support, low       well as the price development of small
bioenergy prices and green electricity       and medium-scale CHP technologies.
certificates make these projects fairly      As the installation rate of large district
easy to finance.                             heating systems in areas where there
Useful links:                                exist none today is expected to decline,
• Energy Tax Law                             new CHP installations will probably
                                             be in existing industries or as a part
• Green electricity certificates:     Lag    of further developments of currents
(2011:1200) om elcertifikat                  district heating systems or trough the
                                             connection of smaller district heating
  3.6.6. Market Environment                  systems in to larger. The latter option as
                                             well as the upgrading of installations are
Worldwide, the use of solid biomass is of    the two most common developments for
key importance in the supply of energy.      CHP that are currently being observed.
Solid biomass is still by far the most       Also the price of biomass is monitored
utilized form of renewable energy in         closely; however, it is not projected to

                                                                                            Market Handbook CHP
Sweden. At the end of 2011, electricity      increase significantly as biomass prices
produced from biomass added up to 9%         in Sweden are balanced by pulp wood
of the total electricity mix. Whereas most   prices and the international biomass
CHP plants that have been builtso far        trade.
operate on a rather large scale, a growing
interest for smaller CHP technologies        Svebio yearly produces a map (see
amongst industrial and smaller district      Figure ‘Biopower’) displaying all bio-
heating companies is evolving.               power production units in Sweden.
                                             The map from 2011 shows biopower
All developments of CHP in Sweden are        production at 172 locations, and another
dependent on the heat demand close to        39 units that are at the planning stage.       101
the plant. The highest electricity gains
                                             This includes 83 CHP plants in district
are found where the heat demand is
                                             heating, 39 units in industries, and 50
constant, as the energy outtake from
                                             small plants using biogas for electricity.
a boiler as well as net income from
electricity production is constant.          Useful links:
Nevertheless, CHP in district heating        • Svenska Kraftnät (Swedish national
systems serving private households           grid)
with varying loads, temperatures and
seasons can also be profitable, but          • Green electricity trading market
                      • Swedish Energy Agency                      Figure ‘Biopower’: Location of biopower
                      • Swedish Board of Agriculture               productions units
                      • Swedish Board of Forestry
                      • Official Swedish Statistics
                      • Swedish bioenergy association
                      • Swedish district heating association
                      • Swedish energy association
                      • Swedish waste association

                        3.6.7. Regulation

                      The approval of solid biomass plants by
                      authorities is not perceived as a barrier.
                      Nevertheless, approval periods can vary
                      from authority to authority, depending
                      on their work load, skilled personnel
                      and local conditions. For the approval,
                      several emission and noise thresholds
                      have to be fulfilled.
Market Handbook CHP

    Emission thresholds and regulations
    differ according to the size of the
    installations. The larger the plant, the
    stricter are the environmental demands.
    The Swedish Environmental authority
    provides local and regional authorities
    with recommendation of how to set
    environmental permit thresholds. The
    constraints    (permit    provisions)  in
102 environmental permits also vary to
    great extent dependent on the feedstock
    used. Here, waste incinerations plants
    and operations based on used wood
    have much stricter operation conditions.
    All permitting authorities in Sweden are
                                                                   Hence, the permitting process is often a
    knowledgeable of bioenergy installation
                                                                   relatively straight forward process, even
    as these are very common in all regions
                                                                   though permit provisions, especially
    of the country. The general public is
                                                                   with regards to air and water emissions
    also used to bioenergy installations.
are being tightened and thresholds            the Swedish economy is rated with
are being lowered. As in all permitting       best scores at Standard & Poor’s4 and
processes, it is generally beneficial to      Moody’s. Also COFACE country risk rating
initiate a dialog with stakeholders and       sees Sweden at the top of the score.5
neighbours early in the process.              The same holds true for the Corruption
Biomass     plants    in    Sweden      are   Perception Index measuring the level
encouraged to return the clean biomass        of transparency6. Whilst the ease of
ashes to the forest for nutrient cycling.     doing business in Sweden is regarded as
This is supported by very high deposition     quite well by IFC World Bank , starting
cost for these ashes in landfills. The        a business is ranked relatively low due
conditions for spreading of ashes are,        to high administration and regulation
however, relatively strict, and the           requirements.7
process is also costly. Hence, markets        Although Sweden is not a member of
for the alternative usages of ashes, as       the Eurozone and therefore currency
filling material in landfills, in the field   exchange risk have to be taken into
of road constructions, and as fertilizer      consideration, the Swedish krona and
in plant soils, have been developed.          the Swedish state budget follow the
Further information and advice on this        ordinates of the EU leading to only minor
matter can be obtained from, Svenska          currency fluctuations.
energiaskor (Swedish EnergyAshes), an         Banks are familiar with financing
organisation helping biomass plants with      bioenergy projects with view on solid

                                                                                                 Market Handbook CHP
the handling of their bioash, as well as      biomass plants and biomass projects.
from Avfall Sverige , the Swedish Waste       Improved profitability due to carbon and
Management.                                   energy taxation generally make these
Useful links:                                 investment easy to finance.
Facts and figures:                            The market perspectives, political
• Miljöbalken,   Swedish   environmental      framework conditions and economic
law                                           parameters are usually well-known to
                                              decision makers. A special focus when
• Swedish    Environmental      protection    deciding about credits and loans is put
agency                                                                                           103
                                              on the reliable, sustainable and long-
• Laws in the internet
                                              4 Standard & Poor’s: http://www.standardand-
  3.6.8. Project Financing                    5 COFACE:
According to established rating agencies,     try_risks/rating_table?geoarea-country=COUN_
investments into Swedish markets are          AREA_04&crating=&brating
                                              6 Corruption perceptions index 2011, http://cpi.
‘safe’ from a country risk perspective.
Reliability and credit worthiness of          7 IFC, Doing Business Index, http://www.doing-
                      term availability of feedstock supply, as   electricity are rarely aware of the fact
                      well as a sound concept for the sales of    that they are actually buying district
                      the product.                                heating or green energy. Annual surveys
                                                                  conducted by the Swedish Energy
                                                                  Association on the share of bioenergy
                      Useful Links:                               used in Swedish energy system shows
                      Facts and figures:                          that this share has been consequently
                                                                  drastically underestimated.
                      • Svenska Kraftnät (Swedish national
                      grid)                                       District heating accounts for more than
                                                                  half of the heating of buildings in Sweden.
                      • Green electricity trading market
                                                                  In the beginning, the reason for the
                      • Swedish Energy Agency                     large investments in this infrastructure
                      • Swedish Board of Agriculture              was the aim to build large heat plants
                                                                  with efficient flue gas cleaning in order
                      • Swedish Board of Forestry                 to reduce air emissions caused by the
                      • Official Swedish Statistics               large number of individual furnaces and
                                                                  boilers. Thousands of chimneys in a city
                      • Swedish bioenergy association
                                                                  were replaced by one single smokestack.
                      • Swedish district heating association      The result has been very positive. Air
                      • Swedish energy association                quality has improved drastically in the
                                                                  cities, particularly in winter time. District
Market Handbook CHP

                      • Swedish waste associatin                  heating and CHP are therefore being
                      Rating agencies:                            perceived as environmentally friendly.
                                                                  The largest barrier for new connections
                      • Standard & Poor’s
                                                                  is the instalment fee that is sometimes
                      • Moody’s                                   perceived as high relative to other
                      • COFACE                                    energy options.

                      • Corruption Perception Index               Being Sweden’s third largest energy
                                                                  source, one would expect biomass to
                      • IFC Doing Business                        play a major role in the green electricity
104 Project financing institutions:                               supply of the country; however, there are
                                                                  only two providers of locally produced
                      • Swedish Board of Agricultur
                                                                  biomass electricity on the market.
                                                                  Electricity trading companies frequently
                        3.6.9.    Readiness for Uptake            explain this situation with the argument
                      As bioenergy is the largest energy source   that bioelectricity is too complex to
                      in Sweden, the market is well aware of      explain to the market compared with
                      the importance of bioenergy. However,       wind, hydro and solar electricity.
                      customers of district heating and green     In Sweden, the forest industry has
been the major producer of bioenergy
which has been used as a domestic
fuel for a long time. The historic debate
and concerns from the forest industry
regarding the price effects emanating
from the bioenergy development is minor
in Sweden. Bioenergy is actually seen
as a profitable side market for forest
owners, paper and saw mills. However,
lately there has been a public debate
regarding Swedish forestry which might
affect the public perception of bioenergy.
Useful links:
• Swedish bioenergy association
• Swedish district heating association
• Swedish energy association
• Swedish waste associatin

                                             Market Handbook CHP
• Svenska Kraftnät (Swedish national
• Green electricity trading market
• Swedish Energy Agency
• Swedish Board of Agriculture
• Swedish Board of Forestry
• Swedish       Environmental   protection
                      3.7. latvia

                      Latvian Biomass Association
                      Didzis Palejs
                      Jaunbumani, Dreilini
                      LV - 2130 Stopinu distirct
                      Tel.: +37 1 67522399

                        3.7.1. Country Score

                       Country Score Latvia - CHP (November 2011)
Market Handbook CHP

                       In the general scoring for sector, Latvia is rated place 81 out of total 81. The underlying catego-
                       ries that influence this result are displayed in the bar chart above.

106                     3.7.2. Basic Data                                  divided into 118 administrative divisions
                                                                           of which 109 are municipalities and 9 are
                      Latvia, officially the Republic of Latvia, is        cities. The capital of Latvia is Riga; about
                      a country in the Baltic region of Northern           one third of the country’s population lives
                      Europe. It is bordered to the north by               there. The official language is Latvian
                      Estonia, to the south by Lithuania, to the           and the currency is called Lats (Ls).
                      east by the Russian Federation, to the
                      southeast by Belarus and has a maritime              Latvia has a humid semi-continental
                      border with Sweden to the west. Latvia is            climate characterized by warm summers,
                      a unitary parliamentary republic and it is           freezing winters and frequently high levels
of humidity and precipitation. Latvia’s      with more than 50,000 inhabitants.
weather conditions are influenced by the
proximity of the Baltic Sea.                   3.7.3. Energy Policy
Latvia has four pronounced seasons of
                                             The Energy section of Latvia’s Sustainable
near-equal length. Winters, starting in
                                             Development Strategy 2030 identifies
mid-December and lasting till mid-March,
                                             several goals: renewable and safe
have average temperatures of around –
                                             energy, reduced dependency on energy
6°C and they are characterized by stable
                                             imports, the use of local RS, increased
snow cover, bright sunshine, and short
                                             energy efficiency and the formation of a
days. Severe spells of winter weather
                                             joint regional energy market.
with cold winds, extreme temperatures
of around – 30° and heavy snowfalls are      Pursuant to Annex I(A) to Directive
common. Summers, starting in June and        2009/28/EC, Latvia’s target is to increase
lasting till August, are usually warm and    the use of RES from 32.6% of GFEC in
sunny with cool evenings and nights.         2005 to 40% in 2020. The total amount
Summers have average temperatures of         of RES to be utilized in 2020 is 1918
around +19°C with extremes of +35°C.         ktoe. Latvia’s RES targets by 2020 and
The weather in spring and autumn is          beyond are the following:
fairly mild.                                 1) By 2020, the share of renewable
Latvia has hundreds of kilometres of         energy in the total gross final energy
seashore lined with pine forests, dunes,     consumption shall be increased to at

                                                                                          Market Handbook CHP
and continuous white sand beaches.           least 40% and then increased gradually
There are three major ports in Latvia –      thereafter;
Liepaja, Riga and Ventspils, as well as      2) By 2020, the share of renewable
seven smaller ports – Skulte, Mersrags,      energy in the transport sector must
Salacgriva, Pavilosta, Roja, Lielupe, and    reach at least 10% of the gross final
Engure , which are situated along the        energy consumption for transport and
entire coastline of Latvia.                  then increased gradually thereafter.
There are five planning regions of Latvia:   The Law on Renewable Energy still
Kurzeme, Latgale, Riga, Vidzeme,             has not been passed by the Saeima.           107
and Zemgale regions. The planning            The draft Law on Renewable Energy
regions of Latvia are not administrative     specifies measures and targets for
territorial divisions, since they are not    renewable energy generation and the
mentioned in the law which lays down         total final energy consumption that must
the administrative territorial divisions     be achieved by 2020, and provides for
of Latvia. With 2,229,641 inhabitants        financial instruments to promote the use
and a territory of 64,559 km2 it is one      of renewable energy.
of the least populated countries of the
European Union. There are five cities        Although since 2000 equal distribution
                                             of cogeneration power plants has been
                      observed in Latvia, one of the goals of the   In Latvia cogeneration of energy is
                      Latvian power policy as currently defined     regulated by the Energy Law, the
                      by the guidelines, is to increase energy      Electricity Market Law and Cabinet
                      generation using effective cogeneration.      Regulations     No.   221     ‘Regulations
                      Hitherto the main cogeneration potential      Regarding Electricity Production and
                      was observed in the existing district         Price Determination Upon Production of
                      heating that quickly developed in the         Electricity in Cogeneration’ of the 10th of
                      last years, while the amounts of power        March 2009 and according to them, as
                      generated by boiler houses of district        well as the Law ‘On Regulators of Public
                      heating systems decreased gradually.          Utilities’. Furthermore, the Electricity
                      Latvia is aware of the need to satisfy        Market Law adopted on the 5th of May
                      the existing demand for energy using          2005 provides that the merchant
                      the maximum possible amount of local          generating electricity in cogeneration
                      energy resources as well as eco-friendly      may acquire rights to sell generated
                      and sustainable technologies. Therefore       electricity within the framework of a
                      it is still essential to replace existing     mandatory procurement.
                      thermal energy generating units by            As to cogeneration, in accordance with
                      cogeneration units using local energy         Section 28(2) of the Electricity Market
                      resources. The assessed replacement           Law the Cabinet of Ministers sets the
                      possibilities, together with the use of       following criteria:
                      effective energy resources, make a            • Qualification criteria to acquire the
Market Handbook CHP

                      significant contribution to the reduction     right to sell generated electricity within
                      of GHG emissions.                             the framework of mandatory procure-
    The implemented energy policy has                               ment;
    set the increase in efficiency of energy                        • The procedure for the mandatory pro-
    generation as one of the priorities,                            curement and its supervision;
    which has been achieved already, in
    parts at least. Since 2000 the ratio of                         • The procedure for pricing electricity
    district heating energy generated by                            depending on electrical power and fuel
    boiler houses to district heating energy                        used;
108 generated by cogeneration plants has                            • The procedure for covering expenses
    changed and the amount of thermal                               of the mandatory procurement and the
    energy generated by cogeneration                                procedure for refusing from the right
    increased in district heating from 12.03                        to sell generated electricity within the
    PJ (37.8%) in 2000 to 16.82 PJ (58.7%)                          framework of mandatory procurement.
    in 2010, while the amount of thermal
                                                                    • The guaranteed fee for the electrical
    energy generated by boiler houses
                                                                    power of the cogeneration plant.
    decreased from 19.83 PJ (62.2%) in
    2000 to 11.84 PJ (41.3%) in 2010.                               If a producer wishes to sell generated
                                                                    electricity within   the    framework
of    mandatory procurement, and its                     3.7.4. Feedstock
cogeneration plant complies with the
criteria set by the Cabinet of Ministers,             Latvia is characterised by its fertile
the remaining amount of generated                     lowland plains and moderate hills. A
electricity left after consuming it for               typical Latvian landscape is a mosaic
own auxiliaries, is purchased by a public             of vast forests alternating with fields,
merchant in the manner and for the price              farmsteads, and pastures. Agricultural
set by the Cabinet of Ministers.                      land occupies 39% of Latvia’s territory.
                                                      Available farmland is 2,429,800 hectares:
In accordance with the Electricity                    1,805,500 hectares are cultivated and
Market Law Cabinet Regulations No.                    624,300 hectares is abandoned land.2
221 ‘Regulations Regarding Electricity                Forests cover approximately 55 % of
Production and Price Determination upon               Latvia’s territory.3
Production of Electricity in Cogeneration’
were adopted on the 10th of March 2009                Latvia has a high potential of solid
providing for the mandatory procurement               biomass fuels (Figure ‘Potential Soild
of electricity generated by cogeneration              Biomass’). The main solid biomass source
for a set price, as well as envisaging                is wood. In 2006 it has been estimated
rights to receive a guaranteed fee for                that approximately 55% of the total area
electrical power from the cogeneration                of Latvia is covered by woods.
plant.1                                               Although Latvia is a comparatively small

                                                                                                            Market Handbook CHP
                                                      2 Central Statistical Bureau. Statistics database
1 CM Regulations No.221 replace Cabinet of Mi-        2011.
nisters Regulations No. 921 “Regulations Regarding    3 Nature and Environment in Latvia. Latvian Insti-
Electricity Production in Cogeneration” of 6 Novem-   tute.
ber 2006                                              ronment-latvia

             Figure ‘Potential Solid Biomass’: Share of separate renewable energy sour-
             ces in the total consumption of RES in 2010, %

                      country in terms of area – Latvia is the              the annual natural increase in wood and
                      fourth most forested country in Europe,               felling volumes by years (in million m³).
                      outpaced only by Finland (77%), Sweden                If we summarize the energy wood
                      (76%), and Slovenia (63%). According to               potential in Latvia, the forecast sums up
                      the data of the Central Statistical Bureau,           to 30 TWh per year.
                      the area taken by forests in Latvia in
                      2008 was 3,221,000 ha, 1,522,000 ha                   Following types of wood are currently
                      of which were national forests. About                 used for energy production in Latvia:
                      50% of Latvian forests belong to the                  • Wood logs      (chopped    and     spited
                      state, 47% to private owners, 2% to                   firewood);
                      municipalities, and 1% to other owners.
                                                                            • Forest residues     (branches,      tops,
                      5,030,000 m³ of firewood were used for
                                                                            stumps, etc.)
                      energy generation in 2010 (data of the
                      Central Statistical Bureau). As forest                • By-products of wood processing indus-
                      areas have been constantly increasing in              try (woodchips, barks, chips, wood dust)
                      Latvia in the last 20 years, the amount               • Refined wood fuels (pellets, briquet-
                      of wood accumulated in forests or the                 tes, charcoals).
                      wood yield has grown significantly.
                      93% of forested areas corresponding to                The volume of production of wood chip
                      3,155,000 ha, with a total wood yield of              pellets continues to increase year after
                      592 million m³, were available for wood               year. It is promoted by the commissioning
                                                                            of new production facilities. A major part
Market Handbook CHP

                      production in 2010.4
                                                                            of the produced amount is exported to
                      The Figure ‘Wood Increase/Felling’ shows              other countries. About 650,000 tons
                                                                            of pellets were produced in 2010, and
                      4 Forestry during 20 years of Latvian indepen-
                                                                            about 800,000 tons in 2011.

                                Figure ‘Wood Felling/Increase’: Annual increase in wood and felling volumes by
                                years in million m³

  3.7.5. Business Case                      of cogeneration plants and power
                                            generation from renewable resources,
The rate of increase of the use of high-    the potential of electricity grids must be
efficiency cogeneration units in district   increased both in the transmission and
heating is held back by large volumes       distribution system.
of     investments     required,  limited
opportunities of local governments to get   Three support instruments were selected
loans, as well as slow capital turnover.    for this purpose:
Due to these reasons local governments      1.      The          mandatory         electricity
are still operating low-efficiency units    procurement;
causing increased fuel consumption
                                            2.      The guaranteed fee for the set
and failure to ensure heat supply in the
                                            electric power;
required quality. The power generation
process may be optimized and heat           3.      Target subsidies are envisaged
losses in the transmission system may       to promote the development of
be reduced by complex renewal of the        cogeneration     power   plants   using
system. However, the average level of       energy from renewable sources for
efficiency of thermal energy generation     the construction of power plants, apart
units in Latvia has been evaluated as       from that also using funding from the
high.                                       Structural Funds of the European Union
                                            for this purpose.5
Special attention in Latvia is currently

                                                                                                   Market Handbook CHP
drawn to the use of such cogeneration       The support programme – Development
technologies that use RS for energy         of Cogeneration Power Plants Using
generation. Based on the natural            Renewable Energy Sources – is aimed
conditions in Latvia this is mainly         at significantly increasing the volumes
woodfuel. One of the current priority       of electricity and heat generated from
directions is the implementation of         renewable energy sources. Support
measures that promote the increase          is provided to the construction of new
in the share of energy generated from       cogeneration power plants using RES.
RS in the total gross end use of energy,    Activity is financed from the Cohesion
which means that the efficient use of       Fund in the period from 12th of March
                                            2009 to 21st of December 2013. The                     111
biomass is supported not only in the
generation of thermal energy, but also      maximum permissible Cohesion Fund
in the generation of electricity.
                                            5 EMZino_290911_COGEN; Informative report “Re-
A significant cogeneration potential        gular Report of the Republic of Latvia on Progress
is also present in local and individual     Towards Increasing the Share of High-Efficiency Co-
heating, the development of which           generation in Accordance with Article 6(3) and 10(2)
                                            of the Directive 2004/8/EC of the European Parlia-
however has no significant impact on the    ment and of the Council of 11 February 2004 on the
existing heat loads of district heating.    Promotion of Cogeneration Based on a Useful Heat
                                            Demand in the Internal Energy Market and Amen-
Along with promoting the development        ding Directive 92/42/EEC”
                                    Figure ‘Price Comparison’: Changes in prices of wood and natural
                                    gas (Ls/MWh of fuel) from 2009 to 2011

                                    Source: Latvijas Gaze, Central Statistical Bureau. http://www.videszinat-

                      funding intensity is 50 % of the total               recovery;
                      eligible expenditure regardless of the               • Back pressure steam turbine;
                      technology applied.
                                                                           • Internal combustion engine
Market Handbook CHP

                      The Figure ‘Price Comparison’ illustrates
                      the change in prices for gas and wood in             • Gas turbine with heat recovery.
                      the last years.                                      In 2010 86.3% of electricity generated
                                                                           by high-efficiency cogeneration plants
                        3.7.6. Market Environment                          were generated using combined cycle
                                                                           gas turbines (CCGT) with heat recovery,
    The share of RES has traditionally been                                12.8% – using internal combustion
    significant in Latvia’s energy supply                                  engines, 0.7% – using back pressure
    and in 2008 it comprised 29.9% of the                                  steam turbine, and 0.2% – using gas
    total final energy consumption. In the                                 turbine with heat recovery.
112 consumption structure for electricity, the
    RES segment is made up of hydropower                                   A range of cogeneration plants with
    plants, wind power plants, biogas power                                the set power of 1 MW are operating
    plants, and biomass power plants, as                                   in Latvia. Operation of these pants
    well as cogeneration stations utilizing                                does not require a license, and they
    RES.                                                                   sell generated electricity in accordance
                                                                           with the agreement with a transmission
                      Latvia mainly uses the              following        system operator and thermal energy –
                      cogeneration technologies:                           in accordance with the agreement with
                      • Combined cycle gas turbine with heat               a local heat supply company.
Since 2000 the Latvian energy sector                   resources were of renewable nature.
has seen a drastic increase in the
                                                       Currently petroleum products (33.9% in
share of high-efficiency cogeneration.
                                                       2010) and woodfuel (24.6% in 2010) are
71 cogeneration plants with the total
                                                       mostly used for the end use of energy.
electrical power of 947.5 MW operated
                                                       Natural gas is mostly used as fuel at
in Latvia in 2010 generating 3,050 GWh
                                                       Latvian cogeneration plants. Fuel oils,
of electricity which accounts for 40.7%
                                                       peat, coal and biofuel (fuel wood chips,
of the total electricity supply. And
                                                       fuel cut-offs, biogas, and biodiesel)
cogeneration plants (excluding power
                                                       are used in small amounts. The Figure
generated by water-heated boilers)
                                                       ‘Consumption      Cogeneration     Plants’
generated 4673 GWh of district heating
                                                       displays the structure of fuels used in all
power in 2010 which constitutes 58.7%.6
                                                       cogeneration plants which has remained
Heat supply to Latvian consumers is en                 unchanged since 2000.
sured by district heating systems, local               About 22% of thermal energy required
heating and individual heating.                        by users is generated by district heating
The consumption of primary energy                      systems, while 78% of thermal energy
resources decreased significantly from                 is generated by heat supply systems
333.2 PJ in 1990 to 200.5 PJ in 2010.                  other than district (local and individual)
In 2010, 24.9 PJ of energy resources                   (2009, Eurostat). In 2010 about 70%
were used for power generation in high-                of the end use of district heating was
                                                       consumed by households. Amounts

                                                                                                     Market Handbook CHP
efficiency cogeneration. 0.26 PJ of the
                                                       of energy generated by boiler houses
6 Ministry of Economucs of Republic of Latvia.         of district heating systems gradually
  Figure ‚Consumption Cogeneration Plants‘: Energy resources consumed by cogeneration plants
  in the transformation sector in 2010


  Source: Latvian Energy in Figures, Ministry of the Economy, 2011
                                 Table ‚Generated Energy‘

                                 Source: Central Statistical Bureau. Statistics database.

                      increased in the last years as shown in              therefore cogeneration plants generated
                      Table ‘Generated Energy’ of this report.             58.7% of thermal energy and boiler
Market Handbook CHP

    In 2010 the gross national electricity                                 houses – 41.3% of thermal energy from
    consumption was 7500 GWh. 2402 GWh                                     the whole district heating supply.
    were generated by large cogeneration                                   The proportion of electricity generated
    plants (Riga TPP-1 and Riga TPP-2), while                              in cogeneration increased by 132.3% in
    other cogeneration plants generated                                    2010 compared to the levels of 2000. In
    648 GWh. The share of cogeneration                                     2010 the gross electricity consumption
    plants in the gross national electricity                               of Latvia was 7.5 TWh, whereas 2.98
    consumption     in   2010    constituted                               TWh were generated in high-efficiency
    40.7%. The above mentioned yield of                                    cogeneration, as indicated in Table ‘High
114 large cogeneration plants increased                                    Efficiency Cogeneration Plants’ of this
    from 19.6% in 2000 to 32.0% in 2010.                                   report.7
    At the same time the share of other                                    In 2010 cogeneration plants generated
    cogeneration plants increased from                                     4673 GWh (16.82 PJ) or 58.7%, while
    2.5% in 2000 to 8.6% in 2010.                                          boiler houses accounted for 3289
                      If we look at the structure of district              GWh (11.84 PJ) or 41,3% of district
                      heating supply, 28.66 PJ of thermal                  heating thermal power. As indicated in
                      energy were generated in 2010. 16.82                 Table   ‘Cogeneration Plants’ effective
                      PJ were generated by cogeneration
                      plants and 11.84 PJ – by boiler houses,              7   Ministry of
                                                                                 Table ‚High Effici-
                                                                                 ency Cogeneration

                                                                                 Table ‚Cogenerati-
                                                                                 on Plants‘

                                                                                                        Market Handbook CHP
cogeneration provided 2981 GWh                         In 2010 for the production of heat energy
(10.73 PJ) of electricity in 2010, which               and electricity CHP plants mainly used           115
constitutes 63% of the total amount of                 natural gas (98.1%), as well as biogas,
electricity generated by cogeneration                  fuelwood, coal, residual (heavy) fuel oils
plants.8                                               and bio-diesel oil.

8 EMZino_290911_COGEN; Informative report “Re-         The Table ‘Overview Latvia’ shows the
gular Report of the Republic of Latvia on Progress     number of plants, the capacity installed,
Towards Increasing the Share of High-Efficiency Co-    and electricity and heat produced.
generation in Accordance with Article 6(3) and 10(2)
of the Directive 2004/8/EC of the European Parlia-
ment and of the Council of 11 February 2004 on the     Demand in the Internal Energy Market and Amen-
Promotion of Cogeneration Based on a Useful Heat       ding Directive 92/42/EEC”
                                                                                      Table ‘Overview Latvia‘

                        3.7.7. Regulation                          • The procedure for the mandatory pro-
                                                                   curement and its supervision;
    In Latvia cogeneration of energy is
    regulated by the Energy Law, the                               • The procedure for pricing electricity
    Electricity Market Law and Cabinet                             depending on electrical power and fuel
    Regulations     No.  221    “Regulations                       used;
Market Handbook CHP

    Regarding Electricity Production and                           • The procedure for covering expenses
    Price Determination Upon Production of                         of the mandatory procurement and the
    Electricity in Cogeneration” of 10 March                       procedure for refusing from the right
    2009 and according to them, as well as                         to sell generated electricity within the
    the Law “On Regulators of Public Utilities”                    framework of mandatory procurement.
    and herewith the Electricity Market Law
                                                                   • Guaranteed fee for the electrical pow-
    adopted on 5 May 2005 provides that
                                                                   er of the cogeneration plant.
    the merchant generating electricity
    in cogeneration may acquire rights to                          If a producer wishes to sell generated
    sell generated electricity within the                          electricity   within    the   framework
116                                                                of    mandatory procurement, and its
    framework of a mandatory procurement.
                                                                   cogeneration plant complies with the
                      As to cogeneration, in accordance with
                                                                   criteria set by the Cabinet of Ministers,
                      Section 28(2) of the Electricity Market
                                                                   the remaining amount of generated
                      Law the Cabinet of Ministers sets the
                                                                   electricity left after consuming it for
                      following criteria:
                                                                   own auxiliaries, is purchased by a public
                      • Qualification criteria to acquire the      merchant in the manner and for the price
                      right to sell generated electricity within   set by the Cabinet of Ministers.
                      the framework of mandatory procure-
                                                                   In   accordance   with   the    Electricity
Market Law Cabinet Regulations No.                    is a significant support for the promotion
221 ‘Regulations Regarding Electricity                of development.
Production and Price Determination Upon               Cabinet Regulations No.165 Regulations
Production of Electricity in Cogeneration’            on the Activity ‘Development of
were adopted on the 10th of March 2009                Cogeneration Plants Using Energy from
providing for the mandatory procurement               Renewable Sources’ of the supplement to
of electricity generated by cogeneration              the operational program ‘Infrastructure
for a set price, as well as envisaging rights         and Services’ entered into force on
to receive guaranteed fee for electrical              the 17th of February 2009 to ensure
power of the cogeneration plant.9                     implementation of the activity
                                                      ‘Development of Cogeneration Plants
   3.7.8. Project Financing                           Using Energy from Renewable Sources’
                                                      of the supplement to the operational
High investment costs and problems
                                                      program ‘Infrastructure and Services’. The
raising funds are the most significant
                                                      purpose of the activity is to significantly
obstacles     especially    for   local
                                                      increase the amount of electrical energy
governments. There are three support
                                                      and thermal energy generated using
instruments to promote the development
                                                      energy from renewable sources, thus
of cogeneration plants and energy
                                                      reducing Latvia’s dependence on the
generation using energy from RS:
                                                      import of primary energy resources.
• The mandatory electricity procure-                  The activity envisages support for the

                                                                                                    Market Handbook CHP
ment;                                                 building of cogeneration plants using
• The guaranteed fee for the set electric             energy from renewable sources. On the
power;                                                1st of June 2011 contracts for 10 projects
                                                      in respect of funding from the Cohesion
• Target subsidies are envisaged to pro-              Fund in the amount of Ls 21,365,499.55
mote the development of cogeneration                  were concluded within the framework of
power plants using energy from renewa-                activity
ble sources to be invested into the cons-
truction of power plants using funding of             The ease of getting a loan from banks
Structural Funds of the European Union                is very much dependent on individual
                                                      project designs as they assess reliability    117
for this purpose.10
                                                      of the chosen technology as well as
The    possibility   of  a   mandatory                feedstock supply security and price risks
procurement and a guaranteed fee set                  etc. Each bank in Latvia has different
forth in applicable laws and regulations              credit conditions. In general the interest
                                                      rate for bioenergy projects equals
9 CM Regulations No.221 replace Cabinet of Mi-
nisters Regulations No. 921 “Regulations Regarding
                                                      general average interest rate on the
Electricity Production in Cogeneration” of 6 Novem-   market. The interest rate of each project
ber 2006                                              is influenced by several risk factors, the
10 Energy Policy. Ministry of Economics of Republic
of Latvia.
                                                      key is definitely not the purpose of loan.
                         3.7.9. Readiness for Uptake                         Latvian enterprises to facilitate partner
                                                                             searches    for   investment     projects
                      During the last four years only one                    and for exporting or subcontracting
                      CHP project was declined due to public                 businesses. LIAA offers a matchmaking
                      opposition.                                            service, enabling potential investors and
                      The Latvian Association of Heating                     project partners to find suitable Latvian
                      Companies (LSUA), a professional                       companies interested in M&A and joint
                      organization uniting district heating                  venture opportunities.12
                      companies, manufacturers of heating                    The Latvian biomass association ‘LATbio’
                      equipment, advisors and mounting                       was established on the 25th of February
                      companies, suppliers of heating units                  in 2008 as a nonprofit organization. The
                      and equipment, as well as individual                   main aims of the association are the
                      members, has been operating in Latvia                  advertisement of local RES in order to
                      since 1993.                                            achieve higher economic and energetical
                      Firstly, LSUA’s goal is to develop                     independence of Latvia. LATbio’ spreads
                      heat supply, and to introduce more                     information about the availability of local
                      progressive technologies, experiences as               RES and usage aspects, and promotes
                      well as modern power-saving equipment.                 the development of scientific work in the
                      Furthermore, LSUA promotes the use                     field of renewable energy and harvest
                      of local fuel, and the development of                  technologies.13
                      local heating equipment manufacturing.                 Founded in 1946, Latvian State Forest
Market Handbook CHP

                      Finally, LSUA aims at participating                    Research Institute (LSFRI) ‘Silava’ is
                      in the development of heat supply                      main centre of forest science in Latvia
                      development plans and proposals of laws                and one of the leading establishments
                      and regulations. At the moment, LSUA                   of scientific ideas in forestry and the
                      is uniting 64 members that generate                    related research and development in
                      about 95% of Latvian district heating.11               the country. LSFRI’s principal task is
                      The Investment and Development                         to research forest ecosystems and
                      Agency of Latvia (LIAA) is a state                     their components, and to work out
                      institution subordinate to the Ministry                recommendations for the sustainable
118                   of Economics of the Republic of Latvia.                and rational management and use of
                      LIAA offers assistance throughout the                  forests and its products.14
                      process of setting up operations in
                      Latvia, acting as a first point of contact
                      and as a ‘one-stop-shop’ in assisting
                      investors by developing tailored solutions
                      to meet their specific needs. LIAA has                 12 The Investment and Development Agency of Lat-
                      its own regularly updated database of                  via.
                                                                             13 Latvian Biomass Association.
                      11 Latvian Association of Heating Companies. http://   14 Latvian State Forest Research Institute “Silava”.
3.8. finland

Bioenergy Association of Finland
Text: Mr. Pekka-Juhani Kuitto (Executive
Director, retired)
Contact: Mia Savolainen
Korkeakoskentie 17 D, 40500 Jyväskylä,
Tel.: +358 40 7182026
Email: mia.savolainen[at]

  3.8.1. Country Score

  Country Score Finland South - CHP (November 2011)
                                                                        In the general
                                                                        scoring for CHP
                                                                        sector,     Finland
                                                                        - South is rated
                                                                        place 31 out of
                                                                        total 81. The un-
                                                                        derlying catego-
                                                                        ries that influence

                                                                                               Market Handbook CHP
                                                                        this result are dis-
                                                                        played in the bar
                                                                        chart to the left.

  3.8.2. Basic Data                            mostly concentrated in the southern and
                                               central part of the country. About 80%
Finland is a democratic republic in            of the population lives in urban areas.         119
Northern Europe between 60 and 70
degrees north latitude. It is the seventh      Finland is the coldest country in the EU.
largest country in Europe with a total         Latitude is the principal influence on the
territory area of 338,424 km² (of this         country´s climate. On average, winter
69% forest, 10% waterways, 8%                  with snow lasts from mid December to
cultivated land and 13% other). The total      mid March in the south, and from October
population is 5.4 million. The capital and     to early May in the north. The vegetation
largest city is Helsinki (in capital area      zone is mainly characterised by boreal
1 million inhabitants). The population is      forest. The mean daily temperature
                                               in the capital Helsinki is minus 4 °C in
                      January and plus 18 C°C in June. In           agriculture, but also potato and other
                      Northern Finland - also called ‘Lapland’      root vegetables are very common. About
                      - temperatures may fall to minus 25-          0.5-0.7 million hectares can be used for
                      35° C in mid winter. However, because         energy purposes.
                      the Gulf Stream and the North Atlantic        The road- and railway network is quite
                      Drift Current moderate the climate, and       large (main roads 460,000 km, also
                      because of the relatively low elevation       dense forest road network, railroad net
                      of the land area, Finland contains half       is 5,800 km). The maximum total weight
                      of the world’s arable land north of 60°       for trucks is 60 tonnes on public roads.
                      northern latitude.                            Also dense water transport systems and
                      Finland is world famous for its large         routes on the seasides and lakes exist.
                      boreal forest and peatlands, and its global   Finland´s economy provides reliable
                      forest industry that comes therewith.         frameworks for living and business.
                      Forestry land (incl. protected areas) is      Living standards are high. GDP per
                      228,000 km2, of which 52% is owned by         capita is 38,000 € (2011). Finland is:
                      private families, 35% by the state, 8%
                      by companies and 5% by others. The            • Number one in World Economic Forum
                      total volume of growing stock is 2,205        2005 Competitiveness Rankings.1
                      million m3 (solid), of which 50% is pine,     • One of the Least Corrupted Nations
                      30% spruce and 20% non-coniferous.            in the World (number one in 2007 and
                      The annual growth is over 100 million m3      number two in 2011 / Transparency In-
Market Handbook CHP

                      (solid) and annual fellings for industry      ternational).
                      purposes is 55 million m3 (solid). Total
                                                                    • The Best Country in 2010 by Newsweek
                      drain is 71,5 million3 (solid). These
                                                                    (indicators: education, healthiness, qua-
                      numbers are industrial round wood
                                                                    lity of life, economical dynamics and po-
                      contents, without branches, tree tops,
                                                                    litical frames).
                      unmerchantable round wood and stump
                      and root wood, which adds volumes             • The second happiest nation 2012 by
                      around 20-40% more. Peatlands cover           United Nations´ Ranking (1. Denmark,
                      about 30% of Finland´s territory. Peat is     2. Finland, 3. Norway, 4. Netherlands, 5.
120                   growing more annually than it is used         Canada etc.).
                      for energy purposes, about 25 TWh per         Usefull links:
                      year. Most often peat is mixed with wood
                      based fuels or coal at power or CHP           • Finland Statistics
                      plants. It is good quality, indigenous and    • Common information
                      low price fuel. Companies also import
                                                                    • Energy Statistics
                      raw wood.
                                                                    • Bioenergy Statistics: www.finbioener-
                      There are 2.3 million hectares arable
                      farm land in Finland. Wheat, barley and
                      oats are the most produced crops in           1
  3.8.3. Energy Policy                         The objective of the national energy
                                               and climate strategy is to increase the
There are over 400 medium and large            use of RES and their share of energy
scale CHP plants in Finland. CHP produces      consumption. In addition to energy
75% of the heat needed for district            conservation, this is one of the most
heating, and generates 35% of total            significant means by which Finland’s
electricity production. CHP is the most        climate targets can be reached. In use,
common form to produce district heat           RES do not increase carbon dioxide
in Finland; more than 70% of DH was            emissions, but they create employment,
generated in CHP plants (27 TWhth). The        promote regional policy goals, and
length of the district heating networks        enhance the security of energy supply.
is 12,550 kilometers and it increase           The strategy also supports technology
annually by about 4%.                          exports for the industry, which are
Finland is one of the world’s leading users    already becoming an important part of
of RES, especially bioenergy. RES provide      Finnish exports.
one fourth of Finland’s total energy           Finland´s national target is to increase
consumption and account for more than          the use of renewables by 9.5% units
one fourth of its power generation. The        to totally 38% in 2020. Bioenergy has
country’s most important renewable             a major role. Achieving the target
sources of energy include bioenergy –          38% entails an increase in the use of
wood and wood-based fuels in particular        renewable energy of approximately

                                                                                             Market Handbook CHP
–, hydropower, wind power, ground heat         40 TWh compared with 2005, when
and a little solar energy (see Figure ‘Fuel    renewable energy use accounted for
Consumption’).                                 28.5%. One particular target within this
                                               national action plan is for renewables to
Fuel consumption in the production of DH and   account for at least 20% of transportation
CHP in Finland - fuel consumption 64,3TWh      fuels by 2020, taking into account the
                                               double counting referred to in the RES
                                               Directive. Total renewable energy target
                                               in 2020 is 124 TWh (85 TWh for heating
                                               and cooling, 33 TWh for electricity and       121
                                               6,5-7 TWh in traffic) of which bioenergy is
                                               105 TWh. Other targets are to decrease
                                               the greenhouse gas emissions at least
                                               16% until 2020 and to increase energy
                                               efficiency 20% by 2020.
                                               In order to promote CHP production
                                               using biogas (reactor plants), wood
                                               fuels and wind energy a market-based
Source: Finnish Energy Industries              new feed-in tariff for electricity scheme
                      was introduced, financed from the State        Forest wood fuels transported directly
                      budget. In the feed-in tariff system, an       to the energy plants have the greatest
                      electricity producer whose power plant         potential to increase the biomass use for
                      is approved in the system will receive a       energy. In the year 2010, a total of 85
                      subsidy (feed-in tariff) for a maximum         TWh wood based fuels were used (liquid
                      of twelve years. The feed-in tariff will       37 TWh and solid 49 TWh), one fifth of
                      be equivalent to the difference between        the total energy consumption in Finland.
                      the target price and the market price of       Finland is the forest and peatland
                      electricity. The tariff will be paid only to   country. Almost 70% of the area is
                      new plants. The purpose of the subsidy         covered by forest. The total volume of
                      at hand is the promotion of investments        growing stock is 2,205 million m3 (solid),
                      in wind power plants, biogas power plants      of which 50% is pine, 30% spruce,
                      and power plants fuelled with wood-            and 20% non-coniferous. The annual
                      based fuel, and it is dimensioned so as to     growth is over 100 million m3 (solid) and
                      have the total amount of subsidies paid        annual fellings for industry purposes is
                      to the power plant for the feed-in tariff      55 million m3 (solid). Total drain is 71.5
                      periods to compensate for investment           million m3 (solid). These numbers are
                      costs. One purpose of this subsidy is also     industrial round wood contents, without
                      to promote the replacement of peat and         branches, tree tops, unmerchantable
                      coal with forest chips and other biomass.      round wood and stump and root wood,
                      More about feed-in tariff and investment       which adds volumes around 20-40%
Market Handbook CHP

                      grants in the chapter Regulation.              more. Companies also import raw wood.

                        3.8.4. Feedstocks                            According to the estimation reports,
                                                                     the theoretical maximum production
                      The main biomass fuels for CHP and             potential of forest wood chips is 45
                      heat-only plants are wood based fuels,         million m3 per annum. This potential
                      often mixed with peat. Industrial by-          corresponds to approximately 90 TWh.
                      products like black liquor, bark, cutter       However, the practical target is that the
                      shavings and some saw dust are almost          use of wood chips in CHP production
                      totally used for energy purposes. The          and separate heat production will be
122                   black liquor from pulp mills is the most       increased to 13.5 million m3 by 2020
                      important forest industry byproduct that       (nREAP). This is equivalent to at least
                      is used in soda recovery units in energy       28 TWh/90 PJ of fuel. Some 7 million m3
                      production. Bark is created in the forest      (solid) of wood chips were used in 2011.
                      industry. Sawmills provide sawdust,            So, there is still a large unused potential
                      bark, industrial as well as energy chips.      for the generation of energy. Forest chips
                      Saw dust and dry cutter chips are used         consist of logging residues (36%), small-
                      as the raw material for pellets. In the        diameter energy wood (29%), stumps
                      future, sawdust will also be used for          (15%) and roundwood (20%).
                      production of transportation biofuels.
Heat and power plants used 16 million m3     TWh per year. Most often peat is mixed
(31 TWh) solid wood fuels in 2010. The       with wood based fuels or coal at power
amount increased 2.6 million m3 from         or CHP plants. It is good quality fuel,
the year 2009. 6.7 million m3 (17 TWh)       indigenous and low price fuel.

                                                                                         Market Handbook CHP
went to the small houses for energy          Finland has 2.3 million hectares arable
purposes. 6.2 million m3 of the fuels        farm land, of which 1.17 million hectares
used was forest chips and 9.2 million m3     are used for food crops and 0.64 mill.
forest industry’s by-products.               ion hectares for fodder. Approximately
Most of the forest chips was produced        0.1 million hectares are used for
from small-sized trees and logging           cultivating oil plants. About 0.5-0.7
residues. Also the amount of wood chips      million hectares could be used for energy
made from stumps and roots increased.        purposes without posing a threat to
Biorefinery plants also use logging          food production. If 0.5 million hectares
residues as raw material in liquid biofuel   is, thus, used, and assuming that the       123
production. The first so called the second   harvest yield is 20 MWh/ha, this would
generation biorefinery plant is planned      correspond to a potential of 10 TWh.
and coming near future in Finland. One       Currently, agricultural residues are only
large plant needs wood material around       marginally used for energy production.
0.5-1.5 TWh annually as a raw material.      Up today a maximum of 20,000 hectares
                                             are used (reed canary grass and straw).
Peatlands cover about 30% of Finland´s       However, the potential is quite large. It
territory. Peat is growing annually more     is estimated that 2.5 TWh can be easily
than used for energy purposes, about 25      taken and 7 TWh when taking 20% of
                      straw potentials into energy use. Reed      hydro and wind power 3% and others
                      canary grass grown in the fields is         3%.
                      harvested dry in the spring, and usually    Fuel procurement for major biomass
                      compressed into large bales. These and      CHP plants of the forest industry and
                      also straw bales are stored with care       cities is a demanding logistical entity
                      to wait for transportation to the power     which is managed by forest machinery
                      plant where they are crushed and then       and transport companies specialized in
                      combusted amongst wood chips or peat.       the field. The forest industry receives its
                                                                  timber and energy biomass as so-called
                                                                  integrated procurement. This means
                        3.8.5. Business Case                      that industrial pulp wood and energy
                                                                  biomass are harvested and transported
                      There are over 400 medium and large         to the plants using mainly the same
                      scale CHP plants in Finland. CHP produces   equipment. Major CHP plants buy their
                      75% of the heat needed for district         fuel through logistics companies, while
                      heating and generated 35% of electricity    the fuel for heat entrepreneurs´ plants
                      production. CHP is the most common way      is procured from nearby forests and
                      to produce also district heat in Finland,   delivered stakeholders.
                      more than 70% of DH was generated in
                                                                  So far, all forest chips and other
                      CHP plants (27 TWhth). The length of
                                                                  material from the forest sites have
                      the district heating networks is 12,550
                                                                  been transported by truck (maximum
Market Handbook CHP

                      kilometres and increases annually by
                                                                  brutto weight on public roads 60
                      about 4%. The CHP and heat-only plant
                                                                  tonnes), expect in trials with railway and
                      investments continues.
                                                                  waterway vehicles. A winter season with
                      Today, wood based energy is the most        iced-over lake areas (3-4 months) will
                      important renewables and it is growing      decrease the logistical effectiveness of
                      also in the near future. Wood energy        waterway systems. In contrast, railway
                      usage today is almost as large as oil. In   logistics offers more route options and
                      total, 86 TWh wood energy was used in       year-round operation possibilities. The
                      2011 (liquid 37 TWh and solid 49 TWh).      terminal operations are an essential
124                   32 TWh (often mixed with peat) solid        part of railway logistics for keeping the
                      wood fuels were used in energy plants       train capacity in use. Public and forest
                      and 17 TWh in small houses. Carbon          road density is quite optimal in Finland
                      dioxide emissions from the production       and serves operating possibilities almost
                      and use of energy is today 50 million       year-around.
                      tons (almost 70 million tons in 2002).
                                                                  Thus, also biomass production, handling
                      Total energy consumption by sources in
                                                                  technologies,  and    logistic  system
                      2011: oil 24%, wood fuels 22%, nuclear
                                                                  markets will serve huge possibilities
                      energy 18%, coal 11%, natural gas 10%,
                                                                  to the stakeholder´s business over the
                      peat 6%, net imports of electricity 4%,
borders. The rapid development of             renewable energy plants are co-financed
technologies will enable the production       by the government with grants of up to
of high quality fuels, energy security,       40% (new technology). For the plants
sustainable supplies, clean and effective     using BAU technologies, the co-financing
combustion processes, and optimally-          can be up to 30%. This financing applies
integrated solutions for the inhabitants      to companies. Also there exists the feed-
of the communities (households, offices,      in tariff is paid only to new power plants.
shops, service buildings and industry).       A power plant benefiting from the feed-
There already exists a lot of long-period     in tariff would not be eligible for any
practical experience and knowledge            other State aid.
about forest fuel and peat procurement,       Usefull links:
logistics and combustion (Scandinavian        • Finnish Energy Industry Association
fuels). But biofuels are also exported and
imported more and more. The fuel trade        • Bioenergia Association with its mem-
is global and the trend is to use different   bers
kind of mixed fuels. Scandinavian fuels,      • Ministry of Employment and the Eco-
miscathus sinensis, eucalyptus, bagasse,      nomy - Energy
rice husk, willow and other energy
                                              • Ministry of Agriculture and Forestry
wood feedstocks. In general, the major
challenges with biomass fuels are in fuel     • Statistics Finland
feeding and burning properties: stability

                                                                                             Market Handbook CHP
of fuel mass flow, ash behavior due to          3.8.6. Market Environment
high alkalines, chlorine etc. Especially
boiler design for those fuels will be the     The total energy consumption in Finland
future challenge - but very feasible.         was 1 386 PJ or 386 TWh in 2011.
                                              Consumption of electricity amounted
The trend for biomass and CHP will be
                                              to 84.4 TWh (16% of the electricity
as follows: Already large capacity of CHP
                                              consumed in the country was covered
plants and heating boilers and lot of new
                                              with imported electricity). Already
installations, around 50 CHP plants and
                                              today, nearly 30% of the total energy
300 boilers have been built since 2000,
                                              consumption is being produced by               125
increase of biomass mainly in existing
                                              RES. Bioenergy is the most significant
capacity, estimated at least 50 small CHP
                                              source of renewable energy, accounting
plants more (size around 20-30 MWth),
                                              for approximately one-fifth of Finland´s
investments continue in larger CHP
                                              total energy consumption. Today, wood-
plants, mainly replacement investments
                                              based energy is the most important RS
in municipalities or industrial facilities
                                              and it will grow further in the near future.
and always multifuel boilers (biomass
                                              Wood energy usage today is almost as
with peat, coal etc.).
                                              large as the one of oil. In 2011, 86 TWh
The construction investment costs of          wood energy was used (liquid 37 TWh
                      and solid 49 TWh). Solid wood fuels were       demand for energy. The specific energy
                      used in energy plants 32 TWh (often            consumption per capita is high; industry
                      mixed with peat) and in small houses 17        uses about half of the energy generated.
                      TWh. Carbon dioxide emissions from the         An efficient and balanced energy system
                      production and use of energy is today          is crucial. Today, significant indigenous
                      50 million tons (almost 70 million tons        energy sources are limited mainly to
                      in 2002). Total energy consumption by          wood fuels, peat and hydropower, but
                      sources in 2011: oil 24%, wood fuels           the range will be widened with wind,
                      22%, nuclear energy 18%, coal 11%,             biogas, agricultural biomass, biofuels
                      natural gas 10%, peat 6%, net imports          for transport, and heat pumps. The use
                      of electricity 4%, hydro and wind power        of wood fuels is growing the most. The
                      3% and others 3%.                              use of wood chips in CHP production
                      Finland is one of the world leaders in         and separate heat production will be
                      the utilization of wood based energy,          increased to 13.5 million m3. This is
                      the development of biomass combustion          equivalent to at least 28 TWh of fuel. In
                      technologies, and the creation of              2011 some 7 million m3 of wood chips
                      efficient fuel supply chains from farm-        were used.
                      size up to the world´s biggest biomass         For biofuels, the availability and prices
                      plant. The cold climate, long distances        of biomass raw materials, logistics and
                      and an energy intensive industry               other production costs play an important
                      explain why Finland has a relatively high      role when competing with fossil fuels.
Market Handbook CHP

                                 Fossil fuels and renewables 1970–2011, PJ


                                 Source: Statistics Finland, Energy supply and consumption,
The efficiency of wood sales will be          ‚Areal Map‘
improved by the development of up-to-
date, precise, and comprehensive price
statistics systems. Market information
will be produced through a portal, so
that parties will be able to access almost
in real time price information on raw
wood. The most effective incentive for
innovation is a market where broad
diffusion of new solutions happen
quickly and open-mindedly. In addition
to promoting research and development
activities, innovation policy aims to
boost demand for innovations thereby
encouraging companies to develop more
advanced products and services.
About half of Finland´s population
lives in houses heated by district heat.
Consequently, 55% of district heat is        Because of the cold weather, good
used for heating homes. Heating of           insulation of CHPs and heat-only plants
industrial buildings accounts for 10%        district heating pipes improve the energy

                                                                                         Market Handbook CHP
of annual consumption of district heat,      efficiency. The pipelines used in Finland
and the remainder 35% is used by public      consist of two service pipes made of
buildings, offices and shops. Almost 95%     steel, surrounded by polyurethane
of apartment buildings and most public       thermal insulation. The insulation layer
and commercial buildings are connected       is protected by an outer casing made of
to the district heating network. In          polyethylene plastic. A similar structure
single-family houses, a good 7% of           is currently used also elsewhere in
the heating energy comes from district       Europe, but the two-pipe design is a
heat. In larger towns, the market share      Finnish and Swedish speciality. The
of district heating is more than 90%.        structure of district heating pipes is      127
The average price of district heat (value-   standardised by means of European
added tax included) was 6.39 euro cents      EN standards. However, at present all
per kilowatt hour in 2011.                   one-pipe and two-pipe structures use
Finland is a long country between the 60     the maximum insulation thickness, the
and 70 degrees north latitudes (length       so-called series 3 specification. So, the
1150 km) and one third is called North       thermal insulation on Finnish district
Finland, of which almost half part is over   heating pipes is thicker than in other
the Arctic circle (see areal map).           European countries.
                                                                                         Graphical illustration
                                                                                         of the biomass supply
                                                                                         of a modern CHP plant

                        3.8.7. Regulation                            in tariff, which is the difference between
                                                                     the target price and the spot market price
Market Handbook CHP

                      In Finland, there is feed-in tariff for        (last 3 months’ average) in accordance
                      renewable electricity, which is annually       with the amount of electricity produced
                      financed by the State budget. The Act          in a wind, biogas or wood-based power
                      on Production Subsidy for Electricity          plant, approved for the feed-in tariff
                      Produced from Renewable Energy Sources         system. The tariff will be paid only to
                      (1396/2010) lays down provisions on a          new power plants or CHP plants. The
                      feed-in tariff system for which power          target price for electricity produced from
                      plants fuelled with wind, biogas, forest       biogas, wood fuels and wind covered by
                      chips and wood-based fuels meeting             the feed-in tariff scheme is €83.50 per
                      the prescribed preconditions could be          megawatt hour. In CHP production, in
128                   approved.                                      addition, a heat premium of €50/MWh
                      In the feed-in tariff system, an electricity   is paid for electricity produced from
                      producer whose power or CHP plant is           biogas and €20/MWh from wood energy
                      approved in the system will receive a          by way of a supplement to the feed-in
                      subsidy (feed-in tariff) for a maximum of      tariff. The cost of the biogas electricity
                      twelve years. The subsidy varies on the        support scheme is estimated at around
                      basis of a three-month electricity market      €2 million in 2011 and around €10 million
                      price or the market price of emission          in 2020 if the market price for electricity
                      allowances. The producer is paid a feed-       is €50/MWh. If the electricity producer is
not using feed-in tariff system, the plant             3.8.8. Project Financing
owner can get fixed subsidy of €6.90 per
MWh for wood fuels and €4.20 per MWh                 Finland is a member of the Eurozone;
for biogas in power production.                      hence, currency exchange risks for
                                                     investors from other Eurozone countries
The purpose of the subsidy in question               are low. Finland´s economy is rated with
is to promote investments in wind power              one of the best scores at Standard &
plants, biogas power plants and power                Poor´s and Moody´s.3 In addition, Finland
plants fuelled with wood-based fuel, and             was number one in World Economic
it is dimensioned so as to have the total            Forum 2005 Competitiveness Rankings4
amount of subsidies paid to the power                and one of the Least Corrupted Nations
plant for the feed-in tariff periods to              in the World: number one in 2007 and
compensate for investment costs. One                 number two in 2011.5 Finland´s credit
purpose of this subsidy is to promote the            rating is AAA.
replacement of coal and peat with wood
based fuels and other biomass.                       There are plenty of international and
                                                     national banks situated in Finland.
A power plant benefiting from the feed-in            Loan interest levels are rather low but
tariff would not be eligible for any other           variable. The easiness of getting a credit
State aid like the construction investment           from banks is very much dependent on
costs of renewable energy plant are co-              individual projects. Common VAT is 23%
financed by the government with grants               but companies have possibilities to be
of up to 40%, new technologies. For

                                                                                                      Market Handbook CHP
the plants using BAU technologies, the
co-financing can be up to 30%. This                  In the EU, the competition rules are
financing applies to companies.2                     generally divided into two parts:
                                                     regulations applying to the use of
The Energy Market Authority approves                 public support (government support)
power plants and CHP plants for the                  and regulations related to the conduct
feed-in tariff system, pays the feed-in              of businesses. Investments between
tariff upon application, and manages                 the OECD member countries are
other official tasks in the feed-in tariff           regulated by the organisation’s so-called
system.                                              National Treatment Instrument, Code              129
                                                     of Liberalisation of Current Invisible
                                                     Operations and Code of Liberalisation of
                                                     Capital Movements, and the Guidelines
                                                     for   Multinational   Enterprises,     of
                                                     which the latter still only comprises

                                                     3 and
                      recommendations. The Ministry for            technologies or technologies
                      Foreign Affairs of Finland6 provides         that decrease environmental damages.
                      knowledge and information about trade        Typical public energy grants range from
                      and partnership possibilities for national   10-15% for heating plants, from 15-20%
                      and international business cases. By         for landfill gas plant, and from 10-20%
                      international comparison concerning          for wood chips or industrial waste wood
                      the number of investment agreements,         production machineries etc.
                      Finland ranks among the middle group
                      together with Sweden, Denmark, Austria       Usefull links:
                      and Belgium. At the moment, the number       • Ministry for Foreign Affairs of Finland
                      of valid agreements is somewhat over 50.
                                                                   • Ministry of Employment and the Eco-
                      Germany, Great Britain and Switzerland
                      have the most comprehensive networks
                      of agreements, each with well over one       • Finpro
                      hundred agreements.                          • Bioenergia Association with its mem-
                      The partnership with Finnish companies is    bers
                      also worth while. Finpro7 trade supporting
                      organization has 400 professionals in          3.8.9. Readiness for Uptake
                      almost 50 countries. It opens up future
                      business opportunities by understanding      Finland is one of the world’s leading
                      changes in international markets. It         users of RES, especially bioenergy. For
Market Handbook CHP

                      serves clients by enabling them to be in     instance, the production of food based
                      the right markets at the right time with     fuels with different kinds and sizes of
                      a competitive concept.                       machinery fleets, logistic systems and
                                                                   operation education, a high level of
                      The specific energy project financing
                                                                   practical knowledge exists. Also fuel
                      institution is the Ministry of Employment
                                                                   procurement technology, boiler design
                      and the Economy.8 It offers different
                                                                   and manufacturing are globally well-
                      kinds of support in financing, investing
                      and developing projects of renewable
                      energy projects in Finland. The maximum      Today, over 400 medium and large
130                   energy subsidy per cents granted by          scale biomass CHP and heat-only plants
                      the Ministry of Employment and the           are operating in the country. You can
                      Economy are 40% when investments             see modern bioenergy plants and
                      are targeted at new technologies or          technologies everywhere in practice,
                      energy saving appliances at plants using     from farm size up to the world´s biggest
                      renewables. The subsidiy is at 30%           biomass power plant. Many universities,
                      when investments flow into ordinary          institutes, schools and private companies
                                                                   provide education and training in energy
                      6                      and bioenergy know-how and technology,
                      7                              from the practical field courses to the
highest level of scientific research.
Finn-made CHP plants, and modern
harvesting and transport technologies
for biomass are known worldwide. It is
easy to contact companies and public
authorities when you are planning cross
border project into Finland or partnership
possibilities with Finnish companies for
global business.
Usefull links:
• Finnish Energy Industry Association
• Bioenergia
• Ministry of Employment and the Eco-
nomy - Energy
• Ministry of Agriculture and Forestry
• Ministry for Foreign Affairs of Finland

                                             Market Handbook CHP
• Finnish Forest Research Institute
• VTT Technical Research Centre of Fin-
• Motiva
There are hundreds and hundreds
energy and bioenergy CHP and heat-
only plant companies and manufacture
companies. Internet addresses exist
under Associations links.
                      4. annEx

                      Leading questions of the CHP-market handbook:
                      1.Country profile (geography, demographics, logistics, etc.)
                      1.1 Geography and Climate
                      • Total land area
                      • What is the average winter temperature across regions in target country over the
                      last 10 years?
                      • What is the average summer temperature across regions in target country over
                      the last 10 years?
                      • Total number of inhabitants
                      • Total number of households in the country
                      • Population density
                      • Household density

                      1.2 Wealth/economic status of population
                      • What was the average GDP real growth rate between 2008 - 2010?
                      • GDP per capita for 2010
Market Handbook CHP

                      1.3 Logistics - road and rail network
                      • What is the density of rail-network?
                      • What is the density of road-network?
                      • What is the density of water ways-network?
                      • What is the density of the electricity transmission and distribution networks?
                      • What is the density of the gas transmission and distribution networks?

                      2. Energy Policy (political will, nREAP, etc.)
                      2.1 The nREAP is ambitious and proposes appropriate measures
                      • There are high-volume targets for RES
                      • There are high-volume targets for solid biomass for heat
                      • There are high-volume targets for solid biomass for electricity
                      • There are high-volume targets for electricity from CHP
                      • Proposed measures for CHP electricity in nREAP are appropriate and convincing
2.2 A political will to develop the RES-sector is clearly recognisable and stable
• Does the government provide an appropriate budget for the targeted market
growth for DH and CHP ?
• Have the support schemes/framework conditions for investments in heat changed
within the last 2-4 years?
• Have the support schemes/framework conditions for investments in renewable
electricity changed within the last 2-4 years?
• Is a revision of the framework conditions announced, which could affect the small-
scale heat market development?
• Is a revision of the framework conditions announced, which could affect the elec-
tricity market development?
• What is the period of time before the next general (national) elections.

3. Feedstocks
3.1 The solid biomass potential is sufficient to realise small scale heat/CHP/DH
• To what extent will the domestic availability of wooden biomass of forestry change

                                                                                       Market Handbook CHP
by 2020?
• How large is the wood for energy potential from forests today?
• How large is the wood for energy potential from industrial residues today?
• How large is the wood for energy potential based on waste wood today?
• What is the total forest wood potential (irrespective of use)?
• What is the % of forest area owned by public bodies?
• What is the difference between fellings and increment (net groth)?
• What is the % of fellings dedicated to energy purposes?                              133

• How much of the wood for energy potential from forests is already utilised?
• How much of the wood for energy potential from industrial residues is already uti-
• How much of the wood for energy potential based on waste wood is already uti-
• What is the amount of solid biomass feedstock used in competing sectors (e.g. fi-
ber board industry) currently?
                      • Share of the total yearly wood demand fulfilled by imports on latest available year

                      3.2 Feedstocks are available for biofuel production
                      • Area of fallow/abandonned land available for agricultural expansion

                      4. Economic instruments (prices, support schemes/guarantee, subsidies, etc.)
                      4.1   Financial support schemes can be claimed for investments
                      • What proportion of the investment in CHP can be claimed in subsidies (cumulati-
                      ve, including tax advantages)?
                      • When does the scheme end granting funding for CHP?

                      4.2 Financial support schemes can be claimed for operation
                      • <500kW capacity: How high is the legally guaranteed feed-in tariff for electricity
                      for solid biomass CHP in 2010?
                      • 501kW - 2MW capacity: How high is the legally guaranteed feed-in tariff for elec-
                      tricity for solid biomass CHP in 2010?
                      • 2.1MW - 10MW capacity: How high is the legally guaranteed feed-in tariff for elec-
                      tricity for solid biomass CHP in 2010?
Market Handbook CHP

                      • How long is the guaranteed duration of the CHP support scheme?
                      • Is the CHP support schemes threatened by a maximum public spending budget?

                      4.3 Prices of biomass fuels/raw material are reasonable and stable
                      • What is the price for a kWh(th) for a tonne of wood chips
                      • What was the price volatility of wood chips over 1 year period?

134                   4.4 Prices of fossil fuels are high and heavily taxed
                      • What was the average price of coal for households over the last year (2010)?
                      • What was the average price of coal for large scale consumers over the last year
                      • What is the commodity price development of coal over the last 4 years?
                      • What is the tax on coal?
                      • Is the use of coal supported e.g. by tax incentinves, obligations, free delivery of
                      CO2-allowances etc.?
• What is the price per kWh of gas for households?
• What is the price per kWh of gas for large scale consumers?
• What is the commodity price development of natural gas over the last 4 years?
• What is the tax on gas?
• Is the use of fossil gas supported e.g. by tax incentinves, obligations, free delivery
of CO2-allowances etc.?
• What is the price development of electricity of the last 4 years?

5. Market aspects (volume, access to grid, etc.)
5.1 The energy sector is large and expected to grow
• Amount of coal used by medium and large-scale consumers (2010)?
• Expected growth in large-scale use of coal from 2009 to 2020
• Amount of gas used in medium and large scale consumers (2010)?
• Expected growth in large and medium-scale use of gas from 2009 to 2020
• Amount of total national electricity consumption
• Expected growth in national electricity consumption from 2009 to 2020

                                                                                           Market Handbook CHP
• What is the average age of the stock of power plants (coal, natural gas, nuclear)
• Has the region decided to phase out nuclear energy providing potential for RES?

5.2 Access to the electricity grid is guaranteed
• Is there in general an electricity grid available with sufficient capacity?
• Is there in general an electricity grid available with regulated grid access?
• Is there in general an electricity grid available with regulated costs for grid con-
nection?                                                                                   135

• Is there in general an electricity grid available with priority for RES?
• Is the grid operator obliged to connect all renewable energy installations?

5.3 Is access to the heating grid ensured?
• Are there priority rules for renewable energy in the DH sector?
• What is the average age of the stock of domestic heating appliances
                      5.4 Produced energy can freely be marketed
                      • Is the electricity market liberalised and private firms are free to participate in any
                      part of the supply chain?
                      • Is the heat market liberalised and private firms are free to participate in any part
                      of the supply chain?

                      5.5 The electricity market in the target country provides promising growth
                      • What is the rate of additional electricity demand until 2020 (overall, not only RES)?

                      5.6 The heat market in the target country provides promising growth perspectives
                      • What is the rate of the additional heat demand until 2020 (overall, not only RES)?

                      5.7 The Framework conditions for fossil fuels do not impair market development
                      • What is the contribution of imported coal to primary energy supply in real terms?
                      • What is the percentage contribution of imported coal to primary energy supply?

                      5.8 Bioenergy is already implemented with a strong growth
Market Handbook CHP

                      • What is the share of biomass CHP compared to all CHP (in terms of electricity)
                      • What is the growth rate of biomass CHP electricity output over the last 4 years

                      5.9 An intense competition is not recognisable
                      • Number of competitors providing (manufacture or sale) large-scale biomass-fired
                      • Total amount of CHP capacity sold (by existing competitors) over the last 4 years

                      6.Regulations (laws/mandatory       targets   for   bioenergy,   permitting,   emission
                      thresholds, etc.)
                      6.1 Regulatory instruments to support bioenergy markets have successfully been
                      • How large is the quota for RES electricity in absolute terms?
                      • How large is the quota for RES heat in absolute terms?
6.2 The approval procedure by the authorities is adequate in terms of time
• How long does an average permitting procedure for CHP/DH projects (<500kW)
take in the target country (Only the duration of the permission by the authority; fi-
nished plan of the plant and without negotiations of support scheme)?
• How long does the approval process last in average for large scale (>2MW) CHP/
DH plants

6.3 Are criteria for efficiency required?
• Is there a fuel efficiency requirement for biomass in CHP plants?

6.4 Existing emission thresholds can be fulfilled with the applied technology
500kW - 2MW CHP: Dust emission limits for heating systems based on solid biomass
(in mg/Nm3)
• 2MW - 5MW CHP: Dust emission limits for heating systems based on solid biomass
(in mg/Nm3).
• >5MW CHP: Dust emission limits for heating systems based on solid biomass (in
• 500kW - 2MW: CO emission limits for heating systems based on solid biomass (in

                                                                                        Market Handbook CHP
• 2MW - 5MW: CO emission limits for heating systems based on solid biomass (in
• >5MW: CO emission limits for heating systems based on solid biomass (in mg/
• 500kW - >5MW: NOx emission limits for heating systems based on solid biomass
(in mg/Nm3).
• >5MW: NOx emission limits for heating systems based on solid biomass (in mg/
Nm3).                                                                                   137
• Organic Carbon emission limits for heating systems based on solid biomass (in mg/
                      7. Project financing context (economic situation, loan, banks, etc.)
                      7.1 The country has a solid financial position
                      • Standard and poors rating

                      7.2 Export friendliness
                      • Euler Hermes rating
                      • Corruption perception index
                      • Country risk as reflected by the @rating country of COFACE
                      • Ranking of feasibility of “starting a business” in the IFC-World Bank Doing Busi-
                      ness Index
                      • Ranking of Feasibility of “getting credit” in the IFC-World Bank Doing Business

                      7.3 The banks      are    familiar   with   bioenergy   technology   and   support   its
                      • Is the support of bioenergy projects highlighted in official papers of
                      • the banks, like annual reports etc.?
Market Handbook CHP

                      • Are Governmental guarantees for loans for bioenergy investements in place?

                      7.4 Foreign investments are supported in the target country
                      • Are there any programmes implemented in the region to attract foreign invest-

                      7.5 The banks in the target country provide attractive conditions for bioenergy

138                   • Can bioenergy plants benefit from interest rates for credits lower than usual in
                      the market?
                      • Are the support conditions feasible in an adequate scope?

                      7.6 The market is liquid and transparent
                      • Biomass fuel prices (wood chips, pellets, etc.) are published on market places
                      • Financial market instruments (e.g. hedging, futures) are available to lower the
                      biomass fuel price risk
7.7 The value of the investment is stable due to a low currency exchange risk
• Is the market part of the Euro Zone?
• Was the inflation rate of the coutry more or less stable within the last 4 years
8.Readiness for uptake (public acceptance, stakeholder networks, etc.)
8.1 Efficient networks and information are accessible
• National and regional agencies are providing effective help to foreign companies
wishing to invest
• Is there a CHP association assisting the market?
• Public web sites/ information/market reports on bioenergy

8.2 Public acceptance/knowledge of technology
• Is CHP known to and well-regarded by general public?
• Have any CHP project permissions been declined due to public opposition in the
last four years?

                                                                                     Market Handbook CHP

                      Participating companies of the CHP working group

                              rEnErgiE raiffEisEn managEmEntgEsEll-            norton rosE llp
                              schaft für ErnEuErBarE EnErgiE gmBh
                                                                               Rachel Dawes
                              Josef Plank
                                                                               Global Energy and Projects Business Manager
                              Managing Director
                                                                               3 More London Riverside
                              Friedrich-Wilhelm-Raiffeisen-Platz 1
                                                                               London SE1 2AQ, UK
                              1020 Vienna, Austria
                                                                               Phone: +44 (0) 20 / 7444 3162
                              Phone: +43 (1) 211 / 36-5990

                              pusch ag                                         BEnEt ltD
                              Lars Dahlhoff                                    Dan Asplund, Asko Ojaniemi
                              Product Manager                                  Piippukatu 11
                              Auf der Weid 1-15                                40100 Jyväskylä, Finland
                              56242 Marienrachdorf, Germany                    Phone: +35 (0) 8400 / 640460
                              Phone: +49 (0) 2626 / 925 69-15        

                              charmont invEstmEnts ltD                         sEEgEr EnginEEring ag
                              Jean-Michel Sylvestre                            Thomas Krause, Chairman
                              88 Wood Street                                   Industriestraße 25-27
                              London EC2V 7RS, United Kingdom                  37235 Hessisch Lichtenau, Germany
                              Phone: +44 (0) 20 / 7193 0697                    Phone: +49 (0) 5602 / 9379-0

                              polytEchnik – Biomass EnErgy                     laBorElEc gDf-suEZ group
                              Lukas Schirnhofer                                Yves Ryckmans
                              Hainfelderstraße 69                              Rodestraat 125
Market Handbook CHP

                              2564 Weissenbach, Austria                        1630 Linkebeek, Belgium
                              Phone: +43 (0) 2672 / 890-26                     Phone: +32 (0) 2 / 382 02 11

                              cts EngtEc oy                                    Ecofys gErmany gmBh
                              Kirsi Juura                                      Sebastian Meyer, Consultant
                              Manager Marketing and Corporate Communications   Landgrabenstraße 94
                              Kaikukatu 7                                      90433 Nürnberg, Germany
                              FI-45101 Kouvola, Finland                        Phone: +49 (0) 911 / 994 358 12
                              Phone: +358 (0) 207 / 567 268          

                              purE EnErgy profEssionals limitED                kwa Eviva gmBh
                              Bruce Woodman                                    Frank Schillig, Managing Director
                              58 Coinagehall Street                            Vogelsanger Straße 250
                              Helston TR13 8EL, United Kingdom                 50825 Köln, Germany
140                           Phone: +44 (0) 1326 / 572 720                    Phone: +49 (0) 221 / 789 469-11
        Sector handbook CHP
        Market Handbook CHP


                      Rue d’Arlon 63-65
                      1040 Brussels

                      First Edition September 2012
Market Handbook CHP

142                   Special thanks are expressed to all industry stakeholders of the CHP working group for
                      their contributions and their part in the discussions during the elaboration of the list of
                      criteria and indicators.

                      Photos: ABA, GDF Suez, Direct Industry, Vattenfal, Flickr.

Project Coordinator
        EuropEan Biomass association (aEBiom)
        Mr. Jean-Marc Jossart
        Phone: +32 (0) 24 00 10 61

Project Partners
        austrian Biomass association (aBa)
        Mr. Christoph Rosenberger
        Phone: +43 (0) 1533 07 97/25

        Danish BioEnErgy association (Di BioEnErgi)
        Mrs. Kristine van het Erve Grunnet
        Phone: +45 (0)33 77 33 69

        BioEnErgy association         of    finlanD (finBio)
        Mrs. Mia Savolainen
        Phone: +358 40 7182026

        gErman BioEnErgy association (BBE)
        Mr. Thomas Siegmund
        Phone: +49 (0) 228 81 00 223

        hungarian Biomass compEtEncE cEntEr
        Mr. Imre Németh; Email: obekk[at]
        Phone: + 36 (0) 28 420-291

        italian agroforEstry EnErgy association

                                                                          Market Handbook CHP
        Mrs. Annalisa Paniz; Email:
        Phone: +39 (0) 49 88 30 722

        latvian BioEnErgy association (latBionrg)
        Mr. Didzis Palejs
        Phone: +371 (0) 675 22 399

        slovak BioEnErgy association (skBiom)
        Mr. Josef Viglasky
        Phone: +421 (0)45 5206 875

        swEDish BioEnErgy association (svEBio)
        Mrs. Lena Dahlman                                                 143
        Phone: +46 (0) 8 441 70 83

Consulting Partners
        EclarEon consultants
        Mr. Christian Grundner
        Phone: +49 (0)30 246 286 93

        impErial collEgE for sciEncE, mEDicinE                 anD
        tEchnology (icEpt)
        Mr. Arturo Castillo-Castillo; Email:,
        Phone: +44 (0)20 7594 7312

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